MexECON Blog

Consumer Confidence Rolls Over

In a report yesterday, Mexico's August consumer confidence index fell by a seasonally-adjusted 0.8%.  The decline essentially erased the revised 0.8% rebound in July.  Moreover, readings for several of the months before that were revised downward.  According to the report, from the official statistics agency INEGI, the subindex on consumers' willingness to buy durable goods fell 5.5% in August, after rising 1.3% in July.  The subindex on consumers' views of the current situation for their own family dropped 0.6%, after increasing 2.1% in the previous month.  All three of the remaining subindexes rose in August, but at a weaker pace than in July.

Comment:  Mexican consumer confidence temporarily rebounded after the July 1 presidential election, but it now looks like optimism is weakening again in response to negative developments abroad.  In fact, with the downward revisions to so many prior months, it is now clear that confidence has rolled over completely.  With the Mexican economy still growing unusually fast, there is some reason for optimism, and consumer confidence had been on the upswing until quite recently.  However, consumers now face the implications of the European debt crisis, slowing growth in the major developed and emerging economies, and drought-inspired food price inflation.  If the weakening in confidence gets bad enough, it could undermine domestic demand right when the problems abroad are raising the risk of an export slowdown as well.

Patrick Fearon, CFA
Vice President, Fund Management

                                            Mexican Consumer Confidence
                                       Seasonally Adjusted, January 2003 = 100
                                                    Source:  INEGI
Consumer Confidence 1208

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