MexECON Blog

Consumer Confidence Falling Rapidly

Mexico's January consumer confidence index plunged to a seasonally-adjusted 83.4, after revised readings of 88.9 in December and 91.0 in November.  The index has now fallen for five straight months, leaving it at the lowest level since April 2010.  According to the report, released Wednesday by the official statistics agency INEGI, the decline in January reflected decreases in all five subindexes.  The January subindex on consumers' willingness to buy durable goods fell all the way to 62.9 from 73.9 in December.  The subindex on consumers' view of the current situation for their own family dropped to 91.6, while the subindex on their future expectations for their own family declined to 94.5.  The subindex on consumers' view of the current situation for the country as a whole decreased to 83.0, and the subindex on their future expectations for the country slid to 89.1.

Comment:  Mexico's consumer confidence index is designed so that readings of 100 reflect the level of optimism in 2003.  The steep slide in the index since mid-2013 reflects a number of problems.  Stagnant exports, weak government spending, and a frozen construction sector have all combined to stall new hiring.  In addition, consumer inflation has accelerated, in part because of higher sales taxes that took effect at the beginning of January.  Finally, those consumers that rely on funds sent from family members working in the United States have been hurt by an ongoing slide in remittances.  If the U.S. economy accelerates as expected this year, Mexican exports and employment could strengthen.  However, the problems in Mexico's domestic demand show no signs of dissipating, and that could keep a lid on consumer optimism, spending, and overall economic growth.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1401

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