Mexico’s Economy Rebounds The Most In Last 5 Months

The retail sales in Mexico rose more than analysts expected in August. Accelerated job creation and a rebound in consumer confidence helped bolster spending.

A jump of 4.4 percent sales rose from the earlier year, the fastest in five months. The statistic agency of Mexico reported this rise on their website. According to median estimate of expert analysts saw an increase of 2.7 percent. This was the second consecutive month in which sales growth has beaten economist forecasts by experts.

Mexican economy is gaining steam which is relevant with the jump the sales. The growth had stumped even the expert economists’ forecasts in seven of the past nine quarters, according to PNC Financial Services Group and Goldman Sachs Group Inc. Recovering from the lowest level in almost four years in January after Mexico introduced new taxes on sugary drinks and junk food and raised the sales tax in some states, the consumer confidence rose to the highest in a year last month.

According to Bill Adams, senior international economist at PNC in Pittsburgh, said in a note to clients, “Mexico’s economy is back, the real estate market dislocation of 2012-2013 is behind us, North American manufacturing is performing well, and Mexico’s unemployment rate fell in the latest September release.”

In September only, the economy generated 156,400 payroll jobs, beating the 118,000 forecast by analysts surveyed by experts. The gain was more than twice as big as the August increase.

The economy is regaining momentum as the gross domestic product expanded 1 percent in the second quarter from the previous three-month period, surpassing estimates of a 0.8 percent increase. The economy grew at an annualized rate of 4.2 percent in April through June.

Another expert, Alberto Ramos, chief Latin America economist at Goldman Sachs, said in a report, “The July-August retail sales figure supports our view that after regaining momentum during the second quarter, the Mexican economy is likely to improve further in the second half of the year.”

To further jazz up the consumption gains, the path is to create stronger job creation and faster credit growth, according to Ramos. Wage growth has been sluggish over the past year and “significant slack” remains in the jobs market, Ramos further added.

Though all is not good, there is weakness too in some measures of consumer spending. Same-store sales tracked by a trade group called Antad, which represents supermarkets and department stores, fell 2.1 percent in September from last year, missing analysts’ estimate of a slight increase.

Last month’s same-store sales at Wal-Mart de Mexico SAB, the nation’s largest retailer, slid 2.7 percent and shares hit a six-month low Oct. 20 after its third-quarter profit missed analyst estimates.

Ramos further stated, “Mexico’s statistics agency changed the base year in its retail survey to 2008 from 2003, leading to substantial revisions to prior data.”

Aniruddha Badola

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