"Mexico Retail Report Q2 2016" is now available at Fast Market Research

Growing household income will continue to drive growth in the middle class and uplift the Mexican population over the 2016-2020 forecast period. Rising employment and a stable political and economic outlook will dampe n volatility in the country and foster steady growth in household spending , as more disposable income becomes available to consumers , despite the effect of recent interest rate hikes . Together , these factors will expand the consumer market and bolster consumer confidence, c reating a favourable environment for retailers as internal consumption and economic activity expand. Growth across all sub-sectors will be strong , but e-commerce and online sales can be expected to see explosive upward trajectory. Additionally , the food & drinks sub-sector will continue to see the emergence of higher value premium brands as consumers seek more aspirational products and brands .

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Key Views & Developments

We expect household consumption to continue to improve, thanks to a stronger labour market (unemployment stands at 4.1%, beating the US's 5.0%), and higher wages. This will be further supported by low inflation), which will help support real purchasing power.

Growing consumer acceptance and demand for online retail has the potential to radically disrupt and transform the existing business environment and retail formats. Amazon has invested heavily to expand the market and this will likely cannibalise heavily on market share from Sear, Woolworths and Blockbusters. This will additionally intensify competition in convenience and grocery retail sectors and place pressure on margins for retailers like Walmart.

Banco de Mexico (the Mexican reserve bank) raise interest rates in December 2015 after following the FED increase, and further hikes can be expected throughout the year. However, the weak external environment and low inflation will keep interest expansion subdued and will remain offset by the growing economic competitiveness internationally of the Mexican economy, that will fuel strong household income growth. Net household income is set to rise 3.1% to USD18,358 in 2016, stimulating household spending which is forecast to see 45.2% growth between 2016 and 2020.

The Mexico Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.

BMI's Mexico Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.

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