Mexico's September consumer confidence index fell by a
seasonally-adjusted 1.5%, after a revised decline of 0.9% in
August. The decline in September was the worst since April
2011, and it marked the third drop in the last four months.
According to the report, from the official statistics agency INEGI,
the subindex on consumers' view of the current situation in the
country as a whole plunged 5.5% in September, accelerating from a
decline of 0.3% in August and marking its sharpest decrease since
mid-2010. The subindex on future expectations for the country
as a whole slid 2.4%, after a small rise the previous month.
The subindexes on consumers' views of the current situation and
future expectations for their own family also both declined.
The important subindex on consumers' willingness to buy durable
goods fell 3.3% in September, but that was not as bad as the 5.5%
fall in the previous month and the 8.8% plunge back in June.
Comment: The European debt
crisis has calmed down since early September, and recent reports
for Mexico show continuing strong economic growth, a rebounding
manufacturing sector, and a stable labor market. With the
environment for Mexican economic activity looking positive, it
appears the on-going fall in consumer confidence stems mostly from
accelerating price increases. Consumer price inflation in
Mexico accelerated to 4.6% in August, reaching its highest level in
almost two and a half years. The problem of inflation may
help explain why the subindex on consumers' willingness to buy
durable goods fell less in September than in August. With
price increases accelerating, some consumers may want to lock in
prices for high-cost items before they become even more
expensive. Nevertheless, accelerating inflation and falling
optimism pose a risk to Mexico's domestic demand. Mexico's
budding inflation problem stems in part from drought-driven food
costs and rising prices for globally traded energy products, but
some of it probably also comes from the country's strong economic
growth. It is therefore becoming increasingly possible that
Banco de México will raise interest rates in the coming months.
Patrick Fearon, CFA
Vice President, Fund Management
Mexican Consumer Confidence
Adjusted, January 2003 = 100