MexECON Blog

August Consumer Confidence Falls

In a report earlier this week, Mexico's August consumer confidence index fell by a seasonally-adjusted 1.3%, after revised increases of 1.7% in July, 1.6% in June, and 1.5% in May.  The decline in August reflected decreases in four of the five subindexes.  The biggest decline came in the subindex on consumers' willingness to buy durable goods.  That subindex dropped 5.8%, though the fall came after three straight months of solid gains.  The subindex on consumers' view of their own family's current situation fell 3.3%, after two straight months of good increases.  There were modest declines in the subindexes on consumers' future expectations for their own families and for the country as a whole.  In contrast, the subindex on consumers' view of the current situation in the country as a whole rose moderately for a third straight month.  The report was released by INEGI, the official statistics agency.

Comment:  The pullback in Mexican consumer optimism during August likely reflects the dramatic declines in the world's financial markets last month and the realization that economic growth is slowing around the globe.  Some of the decline could have also been a delayed reaction to the surge in Mexico's unemployment rate during late spring and early summer.  Joblessness fell back quickly in July, but with lots of gloom-and-doom stories in the press, it is little wonder that Mexican consumers have become more skittish.  The improvement in the labor market and the continuing growth in the Mexican economy suggest domestic demand could continue to rise and help offset any weakening in international trade as the global economy slows.  Nevertheless, Mexican economic growth cannot be totally insulated, and the country's economic activity is likely to keep moderating in the near term, with risks skewed to the downside.

Patrick Fearon, CFA
Vice President, Fund Management

                                       Mexican Consumer Confidence
                             Seasonally-Adjusted, January 2003 = 100
                                                    Source:  INEGI
Consumer Confidence 1108

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