MexECON Blog

February Consumer Confidence Edges Down

Mexico's February consumer confidence index edged down by a seasonally-adjusted 0.1%, after a 2.6% surge in January.  According to the report, from the official statistics agency INEGI, the fall in February came mostly from a 19.9% decline in the subindex on consumers' willingness to buy durable goods.  That subindex had jumped 12.0% in January and 12.9% in December.  Meanwhile, the subindex on consumers' view of the current situation of the country as a whole fell 1.6%, and the subindex on consumers' future expectations for their own family fell 0.9%.  In contrast, the subindex on consumers' view of the current situation of their own family rose 1.3%, and the subindex on their future expectations for the country as a whole rose 1.8%.

Comment:  At first glance, the big drop in the subindex on consumer willingness to buy durable goods is disturbing.  However, this subindex can be very volatile, and its decline in February did not erase all of the strong increases in the previous two months.  More broadly, the gradual improvement in Mexico's labor market has recently boosted consumer optimism, and that dynamic looks set to continue.  All the same, today's report suggests accelerating inflation may be starting to unsettle some consumers.  A sharp drought has increased some food costs, and international tensions related to Iran's nuclear program have boosted global oil prices.  Just as important, producers have faced much higher costs over the last year, and they have finally started to pass those costs on to consumers.  If prices continue to rise rapidly, optimism could fall more substantially and consumption could be ratcheted downward enough to significantly dent Mexico's economic growth.

Patrick Fearon, CFA
Vice President, Fund Management

                                       Mexican Consumer Confidence
                              Seasonally Adjusted, January 2003 = 100
                                                    Source:  INEGI
Consumer Confidence 1202

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