2014-01-22 21:57:39 - New Retailing research report from Business Monitor International is now available from Fast Market Research
In 2014, we believe that declining unemployment, which we forecast to fall from 5.2% in August to 4.2% by the end of next year, combined with an overall improvement in economic activity, as the US economy also picks up, will lead to stronger household spending in Mexico.
We maintain our Mexico real GDP growth forecast of 2.3% in 2013 and 3.5% in 2014, compared to 3.8% in 2012. Real private consumption has held up relatively well despite the weakening of the overall economy in H113, and we expect household spending to pick up over the coming months. In addition, we believe President Enrique Pena Nieto's reforms will attract significant investment over the coming years.
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that while the recent string of hurricanes poses a downside risk for growth in Q313, the Mexican economy will sustain a broad recovery through the end of the year, after a weak performance in H113, and accelerate at a robust pace in 2014. The main drivers of growth over the coming years will be household spending, which has held up relatively well this year despite unfavourable economic conditions, and stronger exports, driven by greater demand from a strengthening US consumer.
Rising incomes and a large unbanked population point to a robust expansion of retail banking services in Latin American over the coming years. Mexico stands out as particularly well placed for rapid growth in consumer banking services. However, near-term challenges, such as weaker economic growth and rising interest rates, will impede more rapid asset growth over the next two years. Moreover, long-term growth of the retail banking sector in Latin America will be contingent on overcoming key structural obstacles such as a large informal economy and a lack of trust in financial institutions among household.
Increasing affluence, a growing population - including a large number of young people - and the continuing development of organised retail infrastructure are key factors behind the forecast growth in Mexico's retail sales. Additional factors, such as a greater number of women working, an increase in the number of formal sector jobs, rises in real wages and easier access to consumer credit, are likely to result in the value of the retail segment increasing by 17.4% (in local currency terms) between 2013 and 2017, from MXN2.67trn (US$210.06bn) to MXN3.13trn (US$263.31bn). South American markets are increasingly attractive to foreign companies because of their 'very healthy' retail spending and large urban populations with rising disposable incomes.
Mexico's retail sector is boosted by the size of its population and its level of urbanisation, along with the sizeable spending capacity of the top 10% of earners. However, the lower spending capacity of its overall population hampers the full development of Mexico's retail sector. Successful expansion into the rural areas of Mexico is only really possible with further infrastructure investment. Potential investors are likely to find that while there is little state interference in industry infrastructure issues, bureaucratic delays are common.
* Casa AGP has signed agreement with Bacardi to allow the sole distribution of the Mexican spirit mescal.
* The Dragon Mart retail complex, Cancun, started construction earlier in 2013, with completion of the 283,6000 sq meters complex expected for 2020.
* Legislation to introduce taxation on certain soft drinks and packaged foods in Mexico has been approved by the country's Chamber of Deputies, Forbes reports. The proposals have been introduced as a means to tackle widespread obesity issues within the country.
* Latest data show that Mexico's retail sales decreased more than expected in June 2013 after recording modest growth the previous month. Retail sales fell 1.9% on a monthly basis in June, reversing the 0.1% gain seen in May. Retail trade moved up 0.1% compared with May, when it recorded a 0.7% increase.
* During the six months ended June, trade in the Mexican retail sector contracted 0.4% from the corresponding period in 2012. At the same time, wholesale sales fell at a faster annual rate of 8.5% in June 2013, compared with 6.9% in May. Wholesalers recorded a 0.64% rise in sales on a monthly basis.
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