Mexico's economy likely to decelerate in Q3

Mexico's retail sales increased 0.5% m/m sa in July as a result of the expansion in food, hardware and apparel sales partially offset by lower supermarket, domestic equipment and paper and entertainment sales.  In annual terms, retail sales increased 5.8%, the highest annual expansion since February 2012.

"The print suggests that the domestic market might maintain momentum in Q3. The GDP proxy of July is expected to expand 0.4% m/m sa, to be reported tomorrow and this figure supports the forecast", says Barclays.

The economy might start to decelerate in Q3. However, this could occur in later months as inflation is at historical lows, real wages are recovering and employment continues growing (0.3% m/m sa in August), supporting the stabilization of the domestic market.  In fact, ANTAD same store sales increased 1.0% m/m sa in August in real terms.