MexECON Blog

January Consumer Confidence Falls to 98.3

Mexico's January consumer confidence index fell to a seasonally-adjusted 98.3, compared with 99.1 in December.  However, that was the first decline since last September, and recent readings are still the strongest since April 2008.  According to the report, released Wednesday by the official statistics agency INEGI, the decline in January stemmed entirely from a second straight drop in the subindex on consumers' willingness to buy durable goods.  That subindex fell 2.7% to 80.0.  The subindex on consumers' view of the current situation in the country as a whole rose slightly to 107.5, while the subindex on their future expectations for the country as a whole was unchanged at 103.1.  The subindex on consumers' view of the current situation for their own family rose moderately to 105.1.  The subindex on their future expectations for their family jumped to 100.2.

Comment:  Mexico's consumer confidence index is designed so that readings of 100 reflect the level of optimism prevailing in 2003.  At current levels, the index suggests Mexican confidence has now rebounded almost back to that level after plummeting during the global financial crisis and recession in 2008 and 2009.  The index has a long way to go before it would be back at its pre-crisis peak of 111.4 in October 2006, but if unemployment resumes its gradual retreat and inflation continues to cool, optimism should keep rising.  Rising optimism would help keep consumption demand on the upswing, providing good impetus for economic growth.  The main risks are that Mexico's construction and mining sectors have recently hit a soft spot, while exports and manufacturing could take a hit if U.S. fiscal policy tightens too suddenly or the European debt crisis flares up again.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1301 - New

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