By Jason Lange
MEXICO CITY, Nov 21 (Reuters) - Mexicans are shutting their wallets on worries about sweeping layoffs and the global financial crisis, raising the chances that Latin America's second largest economy is heading toward a recession like the United States.
Big retail outlets are hurting, and even soda pop is suffering, with a Pepsi bottler planning plant closures across the country.
At a Mexico City shopping mall, schoolteacher Raul Garcia checked the prices on a row of televisions, but shied away from making a purchase.
'We have to focus on priorities like food and clothes,' he said, adding that he now spends part of his income supporting his brother who was recently laid off.
Mexico's economy is already hurting because the collapse of the U.S. housing market is blunting American consumers' appetites for Mexican factory wares.
Now the woes of Mexico's manufacturing sector, which have helped push unemployment close to a three-year high, are extending into the larger economy as Mexicans scale back on their shopping.
Consumer confidence plunged to a historic low in October, when shoppers told national statics agency pollsters they were especially reluctant to buy big-ticket household items, like washing machines, televisions and furniture.
Same-store sales at retailers belonging to the ANTAD group fell 4 percent in October.
Combined, the factors make the crucial service sector, which makes up about 60 percent of the economy, look increasingly like the next economic domino to fall in Mexico.
'You add it all up and what you're going to see is that this will intensify,' said Gray Newman, an economist at Morgan Stanley, who thinks Mexico is now entering a recession.
The Banco de Mexico says the economy will grow as little as 0.5 percent in 2009, slowing from about 2 percent growth expected this year. Economists polled by the central bank last month forecast 1 percent growth in 2009.
Mexico reported on Friday that its economy grew at a 1.6 percent pace during the third quarter, its slowest in five years. The manufacturing sector contracted and growth in services slowed sharply.
CREDIT CRUNCH
Consumer culture in Mexico was just getting back into swing after a financial crisis in the mid-1990s wiped out credit, sending the country deeper into poverty.
Shopping, boosted by strong credit growth in recent years, was seen helping Mexico resist contagion from the sick economy in the United States.
Now, growth in consumer lending is slowing dramatically and as banks facing the world financial crisis worry about rising loan defaults, the central bank has said.
And with inflation running at a seven-year high, Garcia said he has to spend more on household essentials, leaving less money to take his family to the movies or buy toys for his kids.
At a Honda dealership in Mexico City, salesman Gustavo Ramirez is feeling stressed out because fewer cars are leaving the lot.
The picture is grim now -- new car sales plunged 14 percent nationwide in October -- but Ramirez worries even more about next year when the dealership may have to raise prices.
A sharp decline in the Mexican peso this year of over 20 percent is making cars and other goods more expensive to import, further complicating the outlook for retailers.
'We don't have much room to maneuver,' said Ramirez.
That phenomenon is widespread.
Pepsi Bottling Group Inc, hurt by weaker beverage purchases, said on Tuesday it will close three plants and about 30 distribution centers in Mexico, affecting about 2,200 jobs.
J.P. Morgan economist Alfredo Thorne predicts the economy won't grow at all next year, in part because he says recent data shows the Mexican service sector is slowing even faster than manufacturing is.
'Consumers are really getting beaten up,' said Thorne, who also thinks Mexico is entering a recession.
(Editing by Gary Crosse) Keywords: MEXICO ECONOMY/ (jason.lange@thomsonreuters.com; +5255-5282-7151; Reuters Messaging: jason.lange.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MEXICO CITY, Nov 21 (Reuters) - Mexicans are shutting their wallets on worries about sweeping layoffs and the global financial crisis, raising the chances that Latin America's second largest economy is heading toward a recession like the United States.
Big retail outlets are hurting, and even soda pop is suffering, with a Pepsi bottler planning plant closures across the country.
At a Mexico City shopping mall, schoolteacher Raul Garcia checked the prices on a row of televisions, but shied away from making a purchase.
'We have to focus on priorities like food and clothes,' he said, adding that he now spends part of his income supporting his brother who was recently laid off.
Mexico's economy is already hurting because the collapse of the U.S. housing market is blunting American consumers' appetites for Mexican factory wares.
Now the woes of Mexico's manufacturing sector, which have helped push unemployment close to a three-year high, are extending into the larger economy as Mexicans scale back on their shopping.
Consumer confidence plunged to a historic low in October, when shoppers told national statics agency pollsters they were especially reluctant to buy big-ticket household items, like washing machines, televisions and furniture.
Same-store sales at retailers belonging to the ANTAD group fell 4 percent in October.
Combined, the factors make the crucial service sector, which makes up about 60 percent of the economy, look increasingly like the next economic domino to fall in Mexico.
'You add it all up and what you're going to see is that this will intensify,' said Gray Newman, an economist at Morgan Stanley, who thinks Mexico is now entering a recession.
The Banco de Mexico says the economy will grow as little as 0.5 percent in 2009, slowing from about 2 percent growth expected this year. Economists polled by the central bank last month forecast 1 percent growth in 2009.
Mexico reported on Friday that its economy grew at a 1.6 percent pace during the third quarter, its slowest in five years. The manufacturing sector contracted and growth in services slowed sharply.
CREDIT CRUNCH
Consumer culture in Mexico was just getting back into swing after a financial crisis in the mid-1990s wiped out credit, sending the country deeper into poverty.
Shopping, boosted by strong credit growth in recent years, was seen helping Mexico resist contagion from the sick economy in the United States.
Now, growth in consumer lending is slowing dramatically and as banks facing the world financial crisis worry about rising loan defaults, the central bank has said.
And with inflation running at a seven-year high, Garcia said he has to spend more on household essentials, leaving less money to take his family to the movies or buy toys for his kids.
At a Honda dealership in Mexico City, salesman Gustavo Ramirez is feeling stressed out because fewer cars are leaving the lot.
The picture is grim now -- new car sales plunged 14 percent nationwide in October -- but Ramirez worries even more about next year when the dealership may have to raise prices.
A sharp decline in the Mexican peso this year of over 20 percent is making cars and other goods more expensive to import, further complicating the outlook for retailers.
'We don't have much room to maneuver,' said Ramirez.
That phenomenon is widespread.
Pepsi Bottling Group Inc, hurt by weaker beverage purchases, said on Tuesday it will close three plants and about 30 distribution centers in Mexico, affecting about 2,200 jobs.
J.P. Morgan economist Alfredo Thorne predicts the economy won't grow at all next year, in part because he says recent data shows the Mexican service sector is slowing even faster than manufacturing is.
'Consumers are really getting beaten up,' said Thorne, who also thinks Mexico is entering a recession.
(Editing by Gary Crosse) Keywords: MEXICO ECONOMY/ (jason.lange@thomsonreuters.com; +5255-5282-7151; Reuters Messaging: jason.lange.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.