Christmas shopping fever only an illusion in Mexico

MEXICO CITY (Reuters) - Mexican stores are packed with shoppers this Christmas, but slashed prices and big promotions mean cash registers are ringing up meager sales, underscoring a fragile recovery from a punishing recession.

"The stores may be clogged but what are people buying? They are going for the goods marked with a super-discount or super-promotion," said Raquel Moscoso, an analyst of consumer consumption at Ixe Financial Group.

"Everybody is literally slicing the pie ever thinner and in many cases they are sacrificing margin for volume," she said.

Customers like Teresa Saldivar illustrate the retail climate. "Just a few days before Christmas, everything I''ve come across is discounted. It''s great. Now is a good time to buy," said Saldivar, 76, shopping at an upscale department store despite living on a small pension.

Since the global credit crisis threw Mexico''s economy into a downturn last year, retailers like Wal-Mart de Mexico, Soriana and Comercial Mexicana have held off on price increases to keep traffic moving through their stores.

"We''re offering three-day sales to move items that we would have sold quickly without promotions in past years," said Gustavo San Vicente, a salesman at a luxury department store in Mexico City.

Mexico''s economy is expected to have shrunk 7 percent this year after slumping U.S. demand for its manufactured exports threw it into a deep recession. In recent months, the economy has begun to recover thanks to increasing industrial output, but consumer spending remains extremely weak.

NOT SO MERRY

With unemployment well-above pre-recession levels, few Mexicans have more money in their pockets this Christmas than a year ago when the world was in the grip of the economic crisis.

"We are only buying necessities like clothes or food, but not gifts yet. The truth is we are worse off now than last year," said Beatriz Vasquez, who has a job but is worried she won''t receive her customary Christmas bonus.

In the most recent data available, October retail sales in Mexico were down 0.51 percent from September.