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Mexico Retail Sales Rise 5% as Violence Damps Demand

July 21 (Bloomberg) -- Mexican retail sales rose more than analysts forecast in May even as violence tied to drug trafficking reduced demand in the northern part of the country.

Sales climbed 5 percent from a year earlier, led by stationary and clothing stores, the statistics agency said today. Economists had predicted a rise of 3.4 percent, according to the median estimate of 10 analysts surveyed by Bloomberg. The increase, while benefitting from a low base set last year as swine flu and the global credit crisis slashed demand, was the biggest since a 7.3 percent gain in April 2008

Demand trailed the rest of the country in cities along the U.S. border including Ciudad Juarez and Nuevo Laredo, dropping from last year’s levels, the report showed. Northern Mexico is the site of some of the bloodiest violence related to the illicit drug trade, including a shooting earlier this week at a party in Torreon that left 17 people dead and 18 injured.

“Many U.S. citizens used to go shopping in those cities, and now they’re thinking twice,” said Ricardo Aguilar, an economist at Invex Casa de Bolsa in Mexico City.

Drug cartels fighting for routes to smuggle cocaine and marijuana into the U.S. have increased the pace of killings in the region. Mexico has reported almost 25,000 deaths since December 2006 related to organized crime.

The government estimates violence shaves 1 percentage point from gross domestic product each year.

The peso was little changed at 12.7754 per dollar at 12:13 p.m. New York time from 12.7743 yesterday.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at Jlevin20@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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