Analysts’ outlook for Latin American retail in 2018: “stable, reflective of improving operating profits”

The future looks “stable” for retailers in Latin America, reflective of improving operating profits, Moody's Investors Service said in a recent new year’s outlook presentation.

Chile and Mexico will face a bumpy road ahead, defined by key political dates and some shadows cast by threatened or weakened Mercosur and other regional trade agreements.

On the upside, fellow consultancy firm McKinsey advanced that the fashion industry is growing again. According to the McKinsey Global Fashion Index, the industry’s turnover growth between 2016 and 2018 will jump two to three times: from 1.5 to 3.5 – 4.5 percent.

However, a caveat for big players in the industry: The West will no longer be fashion’s largest market starting next year as more than half of all clothing and shoe sales will be outside of Europe and North America.

The largest growth will come from emerging countries in the APAC region (Asia and Oceania) and Latin America: turnover growth will rise to 5 – 7.5 percent in 2018.

Light at the end of the tunnel for retailers in Argentina

In Argentina, consumer-related companies will see some demand recover in 2018 as inflation slows down and real wages recover.

Brazil's retailers will continue to see signs of improvement with lower inflation and decreasing interest rates, but political scenario still brings uncertainty.

Peru has one of the strongest outlooks, as domestic conditions have improved.

Chile and Mexico to be closely watched – political headwinds might lift current burdens

Chile's retailers will continue to suffer due to the country's overall soft economic outlook.

Consumption in Mexico will face headwinds in 2018, especially in light of the uncertainty over the presidential elections and potential impact on trade from renegotiation of the North American Free Trade Agreement.

Image: Massimo Dutti, Mexico City, Mexico. Credits: Inditex