MexECON Blog

June Consumer Confidence Falls Sharply

Mexico's June consumer confidence index fell by a seasonally-adjusted 1.4%, after revised readings showed the index was flat in May and gained 2.2% in April.  The decline in June was the sharpest in more than a year.  According to the report, released Wednesday by the official statistics agency INEGI, the decline reflected sizable decreases in three of the five subindexes.  The volatile subindex on consumers' willingness to buy durable goods dropped a whopping 8.7% in June, after increases of 1.3% in May and 9.3% in April.  The subindex on consumers' future expectations for their own family dropped 1.1%, while the subindex on consumers' expectations for the country as a whole fell 1.0%.  In contrast, the subindex on consumers' view of the current situation in the country rose 0.9% in June, and the subindex on their view of their own family's current situation jumped 2.0%.

Comment:  The decline in optimism during June comes as a surprise, as other data suggests the Mexican economy still has good momentum and global economic conditions seem to have improved versus April and May.  It is true that Mexico's June purchasing managers index for the manufacturing sector showed factory employment growth slowing last month, but that probably should not have had a huge impact on the confidence index.  It is therefore possible that the decline in optimism simply reflected caution during the run-up to Mexico's presidential election on July 1.  If that is the case, optimism could well rebound in the coming months, especially since the election came off with no real surprises and with relatively subdued political challenges.

Patrick Fearon, CFA
Vice President, Fund Management

                                     Mexican Consumer Confidence
                              Seasonally-Adjusted, January 2003 = 100
                                                   Source:  INEGI
Consumer Confidence 1206

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