Economics: Private consumption of services and imports is high as domestic goods continue to take a beating from forex effect

MEXICO - Report 25 Jul 2023 by Mauricio Gonzalez and Francisco González

Last week Inegi released its preliminary private consumption index (IOCP) for May and June and its retail and wholesale sales indexes for May, while the national retail industry association Antad published its store sales results for June the previous week. Those reports show that private consumption sustained the high growth levels in May and June that we saw during the first quarter of the year, all of which is in line with the positive employment and wage indicators reported for the same months.

Growth in private consumption remains concentrated in imported goods and services, which increased at annual rates of 12.4% and 5.2% in April (the most recent month for which this data is available), respectively, while consumption of domestic goods fell 0.7% in the same month. Likewise, the retail sales report showed such revenues were up by an annual 2.3% in May, with increases strongest in categories such as groceries and food, and supermarkets and sales of apparel. In contrast, there were outright contractions in segments related to the consumption of durable and semi-durable goods, such as department store sales, those of furniture and other household goods, and hardware and similar items.

Also in line with the growth in consumption and wages, a very significant real-term increase in consumer credit issued by commercial banks was seen in the first five months of the year, despite the extent to which interest rates have climbed.

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