MexECON Blog

December Consumer Confidence Falls

In a Friday report from INEGI, the official statistics agency, Mexico's December consumer confidence index fell by a seasonally-adjusted 0.3%.  Combined with the revised decline of 1.6% in November, consumer optimism in Mexico has now fallen for two months in a row for the first time since autumn 2009.  According to the report, the pullback in optimism during December stemmed mostly from big declines in consumers' future expectations for their own families and in their view of the current situation in the country as a whole.  In contrast, consumers reported a stronger view of their own family's current situation and a greater willingness to buy durable goods.  They also reported improved expectations for the country as a whole.

Comment:  The second straight month of declining optimism during December probably reflects the rebound in Mexican unemployment during the autumn.  Moreover, many press reports in late 2010 focused on expectations that the Mexican economy would grow less quickly in 2011.  Nevertheless, economic activity in Mexico is still growing.  According to a separate report on Friday, for example, Mexico's December purchasing managers index for manufacturing continued to point to good growth in the country's factory sector.  Continuing growth in exports and manufacturing will probably limit the rise in Mexican unemployment and allow the recent increase in domestic consumption to accelerate.  It is particularly encouraging that the confidence report's subindex on willingness to buy durable goods has now risen in nine of the last twelve months.  If unemployment does not rise too much, and if consumer confidence does not drop excessively, increased domestic demand will help make Mexico's current economic recovery more durable.

Patrick Fearon, CFA
Vice President, Fund Management

                                 Mexican Consumer Confidence
                          Seasonally Adjusted, January 2003 = 100
                                              Source:  INEGI
Consumer Confidence 1012

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