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Sales figures show Mexican economy continues to weaken.

MEXICO CITY -- The slowdown of the Mexican economy was underlined at the end of last week by yet another fall in retail and wholesale sales, with the National Statistics Institute (INEGI) reporting that retailers saw sales rise by a disappointing 0.9% year-on-year in June. Wholesale sales plunged 10.3% in the same period. Although department store and supermarket sales held up, auto sales dragged the retail figures down, suggesting that consumers are postponing big ticket purchases until the economic picture becomes clearer.

Emy Shayo, Latin America economist for Bear Stearns, in New York believes these figures reflect the deepening slowdown in the Mexican economy, which she feels most of the market is underestimating. Indeed, retail sales were the worst since August 1999 and wholesale figures saw their biggest decline since March 1996, suggesting that an even bigger decline is yet to come. Although lower interest rates and a strong peso have helped insulate the consumer from the deteriorating economy, economic weakness and falling employment levels are starting to undermine confidence. As these factors continue to deteriorate these effects can only be magnified.

However, the picture is not entirely bleak, as confirmed by the Mexican Retailers Association (Antad) on Monday. Although announcing a fall in same store sales in its member stores of 1.1% year-on-year in July, Antad said that it does not believe that growth in general consumption is slowing. The group cited the ongoing expansion its retailers were posting, which saw sales rise 5.3% in July, as a sign that the economy is resisting a slowdown, Banco de Mexico's money supply growth was also encouraging, with both provisional M1a and M4a rising in July as the effects of looser monetary policy continue to feed through. Despite these positive signs however, the outlook is uncertain, as the stagnating economy shows little sign of bottoming out.
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Publication:America's Insider
Article Type:Brief Article
Geographic Code:1MEX
Date:Aug 30, 2001
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