The Day at a Glance | October 23 2024

• The Citibanamex survey revealed that analysts estimate a slower growth outlook for next year.

• Retail sales in Mexico remained weak in August.

• China is considering swapping 9 trillion Yuan in local debt for bonds with explicit state guarantees to allow provinces to issue more debt.

• US Vice President Kamala Harris will hold a public meeting with undecided voters on CNN on Wednesday, after Republican presidential candidate Donald Trump declined an offer to debate with the Democratic candidate for a second time.

• European Central Bank officials have started debating whether it is necessary to lower interest rates enough to begin stimulating the economy, putting an end to years of economic constraints.

• According to Reuters, the Bank of Canada will likely cut its benchmark interest rate by 50 basis points this Wednesday, as a series of recent data on inflation, growth, and unemployment call for faster relief for consumers and businesses.

• Oil prices fell on Wednesday after industry data showed US crude inventories rose more than expected, though futures were still up about 2% this week as traders factored in the ongoing conflict in the Middle East.

Economic Environment

The Citibanamex survey revealed that analysts estimate a slower growth outlook for next year. The consensus from the Citibanamex survey estimates that real GDP growth for 2024 will set at 1.5%, and 1.0% for 2025, the latter being 20 basis points below the estimate from just 15 days ago. Regarding the funding rate, the survey expects it to close the year at 10.00%, and the consensus expects the Central Bank of Mexico´s next move to be a 25-basis-point cut in its next meeting scheduled for November. The exchange rate is expected to close 2024 at 19.80 pesos per dollar and 2025 at 20.10 pesos per dollar. For inflation in the first half of October, an increase of 0.39% in the general figure and 0.18% in the core figure is estimated, while for the full month of October, an increase of 0.47% month-over-month in the general inflation and 0.29% month-over-month in core inflation is expected. Over the next 12 months (Oct/Oct) and on an annual basis, inflation is expected to stand at 3.83%. By year-end, expectations for general and core figures are 4.40% (previously 4.44%) and 3.80% (previously 3.80%), respectively. For 2025, forecasts are set at 3.80% (previously 3.81%) and 3.70% (previously 3.70%), in the same order.

Retail sales in Mexico remained weak in August. INEGI reported that retail sales increased by 0.1% month-over-month in August, after rising by 0.7% month-over-month in July and declining by -0.5% month-over-month in June, according to seasonally adjusted figures. On an annual basis, and according to original figures, sales fell slightly by -0.8% in August, below the market expectation of a -0.4% decline. Within the annual figures, the standout was an 8.1% increase in sales made through internet and printed catalogs, while sales in supermarkets and department stores contracted by -2.1%, and sales of groceries, food, and beverages rose by 7.1%. Overall, retail sales showed slight improvement; however, six of the nine reported sectors remain in contraction territory, suggesting underlying weakness.

Markets and Companies

The US stock market retreated, with the S&P 500 posting losses for three consecutive days. Expectations about future rate cuts by the Fed and recent declines in stocks like McDonald’s and Starbucks have weighed on the indices. In Europe, markets are down, and the spotlight is focused on corporate reports. Despite Deutsche Bank exceeding earnings expectations, its shares fell due to a legal dispute in Germany. In Asia, markets showed mixed figures. In Japan, Tokyo Metro went public, with its shares rising by 45%.

As for commodities, oil prices rebounded as US crude inventories increased more than expected, rising by 1.64 million barrels last week. Meanwhile, gold remains at highlevels amidst geopolitical uncertainty and continued demand for safe-haven assets. In fixed income, the 10-year US Treasury bond yields 4.25%, while the 2-year bonds yield 4.06%.

In Mexico, the IPC index is trading lower at 52,312.6 points. 

Regarding the exchange rate, it stands at 19.98 pesos per dollar, after closing at 19.96 yesterday.

Chedraui will publish its quarterly results this afternoon. Chedraui’s revenue is expected to be driven by a favorable exchange rate effect in 3Q24, benefiting its US operations. We estimate mid-single-digit growth in same-store sales (SSS) in Mexico, which would back a consolidated revenue increase of +9.2%.

Walmex will report after market close. We expect Walmexto maintain solid e-commerce growth and mid-single-digit progress in SSS in Mexico, outpacing the ANTAD indicator, while growth in Central America will be more moderate. We estimate a consolidated revenue increase of +7% and EBITDA in line with 3Q23, with growth of around mid-single digits.

Alsea delivered strong performance in 3Q24 yesterday afternoon, with sales increasing across the three regions where it operates; consolidated sales rose +9.3%, and pre-IFRS16 EBITDA grew +9.3%, with a stable margin of 14.0%.

Yesterday afternoon, Livepol reported a revenue increase of +10.4% in 3Q24, driven by growth across all its segments, especially in the retail segment (+9.7%), along with improved profits aligned with its cost-control strategies. EBITDA rose +7.3%, with a 50-basis-point margin contraction, while net income increased +11.3% due to a favorable exchange rate.

Banco del Bajío will report its quarterly results today after market close. We expect the report to reflect the bank’s sensitivity to interest rates and increased reserve generation. This would explain a single-digit decline in quarterly earnings.

Orbia will report 3Q24 results today after market close. We anticipate continued pressure in some of its segments; however, we expect to see sequential improvements. We look forward to details about its outlook for the coming years during tomorrow’s conference.

Gentera will report 3Q24 results after market close. We expect to continue seeing strong growth in its loan portfolio and lower reserve generation compared to 2Q24, which would boost earnings.

Fibra Monterrey will release its 3Q24 results after market close. We expect to continue seeing solid performance in the industrial segment and a positive impact on cash flow from its financial income derived from short-term investments.

Volaris reported a 52.2% increase in EBITDA for 3Q24. This growth exceeded expectations, largely due to efficient cost management and lower fuel prices. In terms of revenue, results were neutral; however, the company forecasts an annual EBITDA margin of approximately 36%.

Grupo México increased its revenue by 13.4% year-over-year, in line with estimates. The rise was driven by its Mining division (+17.8%), while its Transport and Infrastructure divisions recorded declines of 1.9% and 2.4%, respectively. At the consolidated level, EBITDA increasedby 22%, with a margin of 52.7%.

Asur released its 3Q24 results. Total revenue increased by 18.1%, while EBITDA rose by 12.1%. Overall, the report was positive, and we expect the benefits of higher maximum tariffs to continue into 4Q24.

Corporate News

• McDonald’s shares fell more than 6.5% following an E. coli outbreak linked to its Quarter Pounder burgers, resulting in 10 hospitalizations and one death.

• Starbucks reported another drop in sales in its latest quarter and also lowered its sales forecast for 2025.

• Boeing reported losses of $10.44 per share, though its revenue of $17.84 billion slightly exceeded expectations. The stock fell 0.6%.