MexECON Blog

Consumer Confidence Rises to 95.7

Mexico's July consumer confidence index rose to a seasonally-adjusted 95.7, compared with 93.4 in June.  According to the report, released Monday by the official statistics agency INEGI, the rebound in July was broadly based across all five subindexes.  The subindex on consumers' view of the current situation for their own family surged 5.5% to a reading of 99.3.  The subindex on consumers' willingness to buy durable goods jumped 4.1% to 82.3.  Meanwhile, the subindex on consumers' view of the current situation for the country as a whole rose 3.1% to 97.9.  The remaining indexes were also up, but more modestly.  The subindex on consumers' future expectations for their own family rose 1.1% to 101.1, while the subindex on their future expectations for the country edged up 0.6% to 99.8.

Comment:  Mexico's consumer confidence index is designed so that readings of 100 reflect the level of optimism in 2003.  The index climbed almost back to that level at the end of last year, but since then, it has generally been drifting downward.  Even with the rebound in July, the index is no higher than it was in May.  Much of the problem can be traced to disappointing job growth.  Mexican exports have softened in the face of slowing demand from the United States, industrial production has been held back, and new hiring as come to a standstill.  Unemployment is basically stuck at a relatively high 5.1%.  To make matters worse, supply shocks have pushed food prices dramatically higher, and costs have been slow to recede.  Unless there is a big pickup in Mexican exports and growth very soon, optimism is unlikely to improve much further, and consumer spending will probably remain weak.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1307

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