Mexico’s robust consumer emerges as a bright spot in a weak economy

All is not well for Mexico’s economy as it faces high annual inflation and slow economic growth for two decades, but consumption levels have now reached pre-pandemic levels in the second Latin American economy.

Spending surged as Mexicans living abroad sent a record $12.5 billion in remittances home in the first quarter, tourism picked up, pandemic restrictions and infections eased eased, while the labor market remained strong.

As a result, suppliers big and small have reaped the benefits.

Alicia Doreintes Gerardo, who runs a fruit stand in downtown Mexico City, says sales volumes have improved “little by little” over the past three months, despite fruit price inflation doubling.

Fitch Ratings reported on Tuesday that consumption was one of the biggest strengths of the Mexican economy, despite various headwinds.

“Consumption has reached pre-pandemic levels, benefiting from the easing of mobility restrictions, an improving labor market and relatively strong remittances,” Fitch said in a note confirming its “BBB- for Mexico’s sovereign debt.

Rising consumption translated into strong quarterly results at large supermarket chains like Walmart de Mexico (WALMEX.MX) and its smaller counterpart La Comer (LACOMERUBC.MX), which reported year-on-year increases in store revenue comparable to Mexico by 9% and 7.3% respectively last month. Read more

Service companies are also seeing improved demand. Restaurant operator Alsea (ALSEA.MX), which operates local branches of Domino’s and Starbucks, saw net sales rise 49% year-on-year in the first quarter.

Alsea’s chief financial officer, Rafael Grosskelwing, noted that the second quarter got off to a good start, with Easter week revenue climbing a fifth from the comparable pre-pandemic weekend of 2019.

Private consumption in Mexico increased by 1.3% in seasonally adjusted terms in February compared to January, exceeding April’s monthly inflation rate by 0.54%, according to the most recent figures published by the Mexican statistical agency INEGI.

Adrian de la Garza, chief economist at Citibanamex, said the consumption data came as a “surprise” and exceeded expectations.

Citibanamex now expects Mexican consumption to grow 2% in total in 2022, matching the monthly growth rate seen so far this year.

Retailers say the consumer push is being felt across the country.

“We are doing a very, very good performance. Basically everything [through] in the country, we are seeing a recovery in the trend of our same-store sales,” the chief financial officer of the Mexican supermarket chain Soriana told analysts recently.

But not everyone is impressed with the Mexican consumption numbers, including Nikhil Sanghani, Latin American economist at Capital Economics, who said “it’s not going as badly as expected, but it’s not a dazzling recovery”.

“Consumption is not falling like in Colombia and Chile, but also [Mexico] never reached their strength in the first place,” Sanghani added.

Regional headwinds are also looming. Rate hikes in the United States could reduce the flow of remittances to Mexico and strict lockdowns in China could worsen supply chain disruptions to Mexico’s huge manufacturing base.

Yet unlike China, Mexico is open for business as the pandemic subsides.

“We’re at our peak, the cafe is overflowing with people wanting to hang out,” said Erik Belmonte, manager of WO Barra de Cafe, a cafe in an upscale neighborhood in Mexico City.

Reporting by Isabel Woodford; Editing by Anthony Esposito and Nick Zieminski

  • Tropical Storm Celia becomes the third named storm of the 2022 Pacific hurricane season The National Weather Service announced that Tropical Storm Celia has formed, the cyclone is located 450 km southeast of the mouth of the Suchiate River in Chiapas (Mexico-Guatemala border) and 815 km south -east of Salina Cruz, Oaxaca. The storm is maintaining a north-northwest track at a speed of approximately 6 km per hour, sustained winds…
  • Jalisco reports five cases of Monkeypox; four are foreign The Jalisco Health Secretariat (SSJ) confirmed this Friday afternoon June 17 that there were already five cases of monkeypox in the state. Of the five cases, four are foreigners and only one is Mexican; In addition, the age of those infected varies between 38 and 54 years. During a press conference, Dr. Fernando…
  • Cases of suspected terrorists who tried to enter the United States via Mexico have tripled US media have warned that so far in 2022, that country’s border patrol agents have arrested at least 50 suspected members of terrorist groups, who attempted to cross into Mexico, taking advantage of the migratory chaos that unleashed these last years. For the immigration authorities, this figure represents an alarm because in the…
  • Girl, 14, in CDMX gives birth to Uber on way to hospital A 14-year-old pregnant girl gave birth while traveling by Uber in the streets of the María del Carmen neighborhood in the Benito Juárez town hall. The teenager was assisted by police officers from Mexico City’s Secretariat of Citizen Security (SSC) and paramedics from the Emergency Medical Rescue Team (ERUM).…
  • Residents of the city of Puebla lynch and burn alive a man falsely accused of kidnapping Residents of the community of Papatlazolco (Huauchinango, Puebla) lynched and burned a young political adviser on Friday evening. His name was Daniel Picazo, he was 31 years old and was from the region, to which he liked to return from time to time. The family say he must have gotten lost among the…

Comments are closed.