Mexico retail trade rises for fourth straight month in August, surprises markets

Retail sales in Mexico rose for the fourth straight month during the period of August, surprising markets that had expected for a flat reading during the month. This indicates that consumption remains an important pillar of the Mexican economy.

Mexican retail sales rose 0.6 percent in August from July, when adjusted for seasonal swings, data released by Mexico’s National Statistics Agency showed Tuesday. Also, sales increased 8.9 percent in August compared to the same month a year earlier.

However, central bank rate hikes by a total of 175 basis points since the end of last year are likely to increasingly take their toll. As a result, there seems limited scope for further central bank rate hikes, Commerzbank reported.

In December, the Mexican central bank is likely to raise rates once more in line with the US central bank by a further 25bps. After that, a longer break is anticipated. However, should the economy recover more quickly the central bank is likely to tighten its monetary policy more notably as a result of concerns about inflation.

"A further indication of the state of the economy will be provided by the publication of the economic activity index for August today. If this too was to surprise positively the recovery of the peso is likely to continue today," the report commented in itself.