Mexican retail sales growing at impressive pace

Despite the growth weakness in H1 and the visible effect of the slowdown in the Mexican labour market, retail sales on average have continued to trend up this year - in part due to the low base effect in H1 2014, but mostly due to lower inflation this year. The country's retail sales growth will likely average a strong 5.1% yoy year-todate compared with 2.7% in 2014, foresees Societe Generale. 

The recent pace of retail sales is broadly consistent with 2- 4% yoy growth in private consumption spending although the correlation between retail salesand overall consumption growth is not quite strong enough. Strong sales growth in 2011-12 was not reflected in overall consumption, and more recently, consumption has lagged sales growth despite its improvement.
 
Some moderation in retail sales is expected (primarily when the base effect of H1 14 ebbs) until growth improves and the labour market strengthens, added SocGen. However, falling inflation presents some upside risk to sales growth and overall consumption.