MexECON Blog

Consumer Confidence Rises to 96.1

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 96.8.

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

Consumer Confidence 1308

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