Mexico's retail sales decline in June, pointing to a slowdown in consumption
Revenue at Mexican retail companies fell 0.2% month over month in June, although they increased 2.0% year over year in real terms.
Key points
Eurozone economic activity maintains solid and sustained growth in August
Japan's inflation rises in July to its highest level this year
U.S. debt surpasses $40 trillion for the first time
Analysts expect Banxico to remain on hold, with GDP growth of 1.2% and inflation at 4% by the end of 2026
Later (7:45 a.m.), U.S. PMIs for August will be released
For the rest of the day, the interbank exchange rate (Mexican pesos per U.S. dollar) could trade between 16.88 and 16.98 in the spot market
Wall Street futures point to a rebound this Friday following recent declines, although they are not enough to offset accumulated losses, and the major indexes are heading toward a negative week. Markets remain focused on the evolution of bond yields and oil prices, as geopolitical risk increases amid diminishing prospects for a short-term peace agreement with Iran. The S&P 500 is up 0.50% and the Nasdaq 100 is up 0.70%. Meanwhile, WTI is up 0.30% at $87.10 per barrel, while Brent is up 0.30% at $94.04, and the 10-year Treasury yield stands at 4.70%. Yesterday, Treasury Secretary Scott Bessent once again supported the bond market, although with limited success, stating that buybacks could exceed $4 billion per operation and that the government has additional tools to reduce yields and achieve fiscal consolidation.
Monitor
Bolsas / Exchanges
S&P 500
7,701
0.50%
Nasdaq
29,519
0.70%
Dow Jones
53,187
0.60%
IPyC
64,588
0.40%
Monedas / FX (Foreign Exchange)
USD/MXN
16.9012
-0.30%
EUR/MXN
19.7573
-0.20%
EUR/USD
1.1688
0.10%
Índice DXY
98.76
-0.10%
Tasas / Exchange Rates
Treasury 2 años
4.19
0.2 bp
Treasury 10 años
4.70
0.0 bp
TIIE 3 meses
6.58
2.0 bp
M Bono 10 años
9.19
-0.2 bp
Commodities / Commodity Markets
Petróleo (Brent)
94.04
0.30%
Oro
4,578
1.30%
What you need to know about the economy and markets
Mexico's retail sales fell 0.2% month over month in June, while increasing 2.0% year over year. Employment in the sector also declined 0.7% during the month, although average wages increased 0.1%. Within retail trade, annual sales growth was particularly strong in internet and catalog sales, at 23.2%, as well as household appliances and computers, at 10.3%, and vehicles, auto parts, fuels, and lubricants, at 5.2%.
Our Take
The result points to a moderation in consumption at the end of the second quarter, with a monthly decline in retail sales and lower employment in the sector. Nevertheless, annual growth of 2.0% and the 5.2% increase in average wages suggest that consumption retains some momentum, although there are signs of weaker strength ahead.
The Eurozone's preliminary composite PMI rose to 52.1 points in August, its highest level in nine months, from 52.0 in July and above the expected 51.6. The increase was driven by manufacturing, whose index rose to 52.8 points, its highest level in 51 months, while the services PMI remained stable at 51.7 points.
Our Take
Economic activity across the bloc continued to expand in August, supported by stronger growth in manufacturing, laying the groundwork for a significant increase in third-quarter GDP of around 0.3%.
Japan's inflation rose to 1.9% year over year in July from 1.6% in June, its highest level of the year and the third consecutive monthly increase, driven by higher energy and commodity costs. Core inflation increased to 1.8%.
Our Take
The rise in inflation could pave the way for another Bank of Japan rate hike at its September 17–18 meeting, after the central bank raised its benchmark rate to 1% in June.
U.S. government debt surpassed $40 trillion for the first time, just five months after reaching $39 trillion and more than doubling since 2017.The milestone reflects the persistence of large fiscal deficits, while rising mandatory spending, defense expenditures, and debt-servicing costs continue to increase the Treasury's financing needs.
Our Take
The main risk is not the absolute level of debt, but its interaction with high interest rates and a growing supply of Treasuries. A higher cost of financing can further widen the deficit through increased interest payments and require an additional term premium, keeping pressure on the long end of the yield curve.
Citi Mexico's latest survey shows that the consensus expects Banxico to keep its overnight rate at 6.50% for the remainder of the year, with the same median forecast for year-end 2026 and 2027, although disagreement remains over the next move, with 13 participants anticipating some adjustment. For growth, the consensus maintains its forecasts of 1.2% for 2026 and 1.8% for 2027. For inflation, it expects 4.00% at the end of 2026 for both headline and core inflation, and 3.80% for both measures in 2027.
Our Take
The survey results reinforce expectations of a prolonged pause in the overnight rate and continued moderate GDP growth. The dispersion in expectations regarding the next move, between hikes and cuts, reflects persistent uncertainty over the pace of convergence in services inflation and the outcome of the geopolitical environment.
Later, at 7:45 a.m., U.S. manufacturing and services PMIs for August will be released. Consensus expects the manufacturing PMI to come in at 53.8 points, down from 53.9 in July, while the services PMI is expected at 53.9 points, below the 54.6 recorded the previous month. If confirmed, both indicators would point to a slight moderation in activity, while remaining in expansion territory.
Our Take
We expect the PMIs to confirm that the U.S. economy continues to expand, although with some loss of momentum at the beginning of the third quarter. It will be important to monitor new orders, employment, and prices, particularly to assess whether the moderation in activity is beginning to translate into lower inflationary pressures.
Corporate News
Samsung Electronics' Board of Directors approved the largest shareholder return plan in the company's history, worth between 90 trillion and 110 trillion South Korean won. The amount is nearly five times larger than the previous record of 20.3 trillion won, set in 2020, and aims to ensure that the company's growth translates into greater benefits for shareholders.
Micron announced the creation of Micron Research Labs, a new innovation center in the United States focused on the future of memory and artificial intelligence, for which the company will invest $10 billion over the next decade. The center will bring together academics, government, startups, and industry to drive advances in memory and computing linked to the AI era.
Ross Stores raised its earnings forecast after reporting better-than-expected second-quarter results, signaling that demand for discounted clothing and accessories remains strong despite economic uncertainty. Its shares are up around 7% in after-hours trading.
The to-do list
Keep an eye out for the list of economic sanctions against Iran that the United States is expected to announce as soon as next week.
Follow the U.S. PMIs at 7:45 a.m.; consensus expects a slight moderation in manufacturing (53.8) and services (53.9), with both remaining in expansion territory.
Monitor the price of Bitcoin. It has gained nearly 22% over the course of the week.
Spend 20 minutes stretching or going for a walk. Ending the week by moving your body can make a difference heading into the weekend.
Today's recommendation...
The Curse of Widow's Bay on Apple TV — a psychological horror series set in a coastal town with dark secrets, an immersive atmosphere, and a storyline that hooks you from the very first episode.
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Guillermo Quechol gquechol@kapital.com
Nahely Suasnavar nsuasnavara@kapital.com
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