Retail sales volumes in Mexico surprised to the downside in September, landing behind all estimates from market participants as high borrowing costs hurt the sector in Latin America’s second-largest economy.
Sales fell 0.2% in September from August, data from national statistics agency INEGI showed on Wednesday, well below the median forecast of a 0.3% increase in a Reuters poll of economists.
That marked the second consecutive month of negative, below-consensus performance of retail sales in the country, with analysts pointing to major drops in sales of household goods, clothing, and stationery items as the main drags.
“Rising real interest rates and an appreciating currency have dampened the sector’s performance,” Pantheon Macroeconomics’ chief Latin America economist Andres Abadia said, “partially offsetting the support from a still-resilient labor market, falling inflation, and decent remittance inflows.”
Mexico’s central bank has kept its benchmark interest rate at 11.25% since March as part of its bid to tame high inflation. Consumer prices have been slowing, but rate cuts are not expected until next year.
“We think sales will continue to lose momentum next year as the lagged effect of monetary tightening becomes more evident,” Abadia said, noting gains in the third quarter as a whole were linked to a favorable base effect.
According to INEGI, retail sales increased 2.3% in September compared to the same month a year earlier. That was also well below the 3.6% jump projected in a Reuters poll.