Mexico's August consumer confidence index rose to a
seasonally-adjusted 96.1, up from 95.7 in July and 93.5 in
June. The index is now at its highest level since
April. According to the report, released Wednesday by the
official statistics agency INEGI, the improvement in August stemmed
from increases in three of the five subindexes. The subindex
on consumers' view of the current situation for their own family
jumped 1.9% to 101.2, after an even bigger jump in July. As a
result, the subindex is now at its highest level in more than four
years. The subindex on consumers' future expectations for the
country as a whole rose 0.5% to 100.2, and the subindex on their
future expectations for their own family rose 0.2% to 101.4.
In contrast, the subindex on consumers' willingness to buy durable
goods edged down to 82.2, and the subindex on consumers' view of
the current situation in the country as a whole dropped sharply to
Comment: Mexico's consumer
confidence index is designed so that readings of 100 reflect the
level of optimism in 2003. Although the index rose almost
back to that level late last year, it has since pulled back, and
recent readings have been disappointing. Mexican exports have
softened in the face of limited demand growth in the United States,
and domestic demand has weakened in response to problems ranging
from tight government spending to weak construction.
Industrial production has fallen back, and new hiring has
stagnated. Unemployment did fall slightly to 4.9% in July,
which may be one reason for the recent increases in optimism.
However, joblessness probably needs to fall significantly further
before confidence can really rebound and consumer spending can
start contributing more to economic growth again.
Patrick Fearon, CFA
Vice President, Fund Management