Robust Mexican consumer emerges as a bright spot in weak economy -Breaking
© Reuters. FILEPHOTO: This photo shows a woman shopping in Jamaica at last minute for Christmas. The coronavirus (COVID-19), outbreak is continuing, Mexico City. December 24, 2020. REUTERS/Gustavo Graf/File Photograph
MEXICO CITY, Reuters – While Mexico has a difficult two-decade-old inflation rate and slow economic growth, consumption is now at pre-pandemic levels.
Spending has increased as Mexicans living abroad sent a record $12.5 billion in remittances home during the first quarter, tourism picked up, pandemic-restrictions and infections eased, while the job market remained strong.
Vendors of all sizes have been reaping these benefits.
Alicia Doreintes Gerardo manages a fruit stand downtown Mexico City and says that sales volumes have increased “little by little”, despite the fact that fruit prices were doubled.
On Tuesday, Fitch Ratings cited consumption as one the strongest areas of Mexico’s economy, in spite of numerous headwinds.
Fitch stated that consumption has increased to pre-pandemic levels due to easing of mobility restrictions and labor market improvements. Fitch also confirmed its rating of Mexico’s sovereign debt at ‘BBBB-‘.
Increasing consumer spending has led to stronger quarterly results at major supermarket chains Walmart (NYSE) de Mexico, and its smaller sister La Comer. They posted increases of 9% & 7.3% in their same-store revenues last month.
There is also increased demand for service businesses. Alsea (NASDAQ:) is a restaurant operator that operates nearby Domino’s restaurants and Starbucks. In the first quarter, Alsea’s net revenue grew 49% year over year.
Rafael Grosskelwing, Alsea’s Chief Financial Officer, noted that the quarter had a solid start with Easter week revenue rising by five percent compared to the similar prepandemic weekend in 2019.
According to Mexico’s latest statistics, private consumption increased 1.3% in adjusted seasonally in February. This was more than the 0.54% monthly inflation rate in April.
Citibanamex’s chief economist Adrian de la Garza stated that consumption data was a surprise, and it exceeded all expectations.
Citibanamex predicts that Mexican consumption will increase by 2% in 2022. This is consistent with the current monthly growth rate.
Retailers report that the national consumer surge is felt by all.
We are very pleased with our performance. It’s basically all [through]The country, we’re seeing a rebound in the trend for our same-stores sales,” Mexican supermarket chain Soriana’s chief Financial Officer recently stated to analysts.
However, not all are impressed with Mexico’s consumption numbers. Nikhil Sanghani (Capital Economics Latin America economist) said that although it isn’t faring as poorly as anticipated, “it’s still hardly a barnstorming recover.”
“Consumption in Colombia isn’t falling like it is now, as is the case with Chile and Chile. But equally,” [Mexico]Sanghani said that they never reached their full strength.”
The region faces headwinds as well. U.S. rate rises could limit the flow to Mexico of remittances, and China’s strict lockdowns might worsen disruptions to Mexico’s vast manufacturing base.
Mexico, however, has remained open to business, as China’s pandemic recedes.
Erik Belmonte (manager of the WO Barra de Cafe), a cafe in the up-market area of Mexico City said, “We are at our peak. The café is overflowing full of people who want out.”