After the big spike in January and then a flat reading in February, retail sales posted a sluggish improvement in March.
Retail sale are a key indicator of consumer health. This indicator is especially important in consumer driven economies, such as Mexico, where private consumption accounts for approximately two thirds of GDP.
Wholesale sales offer an additional perspective on demand strength in the economy. However, the correlation between monthly retail and wholesale sales growth has been weak1 over the past two years, which means one cannot predict the other. Nonetheless, directionally they tend to move together.
Retail flat, wholesale spikes
The data for March 2013 shows that retail sales increased a mere 0.34% versus February. On the bright side, at least it was not negative again. Wholesale sales on the other hand spiked almost 1.5%, which was a very good bounce after the 0.9% drop in February.
Looking at yearly data shows a dip in both retail and wholesale of 2.4% and 9.9%, respectively, but the data is distorted given Easter was in March this year while last year it was in April. For this reason, the yearly comparison is not very useful. It is also important to keep in mind that April annual growth data will show a strong bounce for the same reason.
As with most recent data coming from Mexico, the outlook is ambiguously negative. While retail sales were almost flat, wholesale sales showed a very strong increase that could point to a more positive outlook.
The most recent PMI, which is a leading indicator, showed a slowdown ahead, and this means the overall outlook continues to be bearish. A surprise in recovery data from the U.S. could potentially boost Mexico unexpectedly.
- ρ=0.38 for monthly growth data from Jan 2011-March 2013. ↩
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