MexECON Blog

Consumer Confidence Recovers Further

Mexico's March consumer confidence index rose to a seasonally-adjusted 90.4, compared with a revised 86.3 in February and a multi-year low of 83.6 in January.  The index is now at its highest level since November.  The rise in March was very broad based, reflecting increases in all five subindexes.  The subindex on consumers' view of the current situation in the country as a whole rose only modestly to 86.0, but the subindex on their future expectations for the country jumped to a five-month high of 92.0.  The subindex on consumers' future expectations for their own family rose only slightly to 98.6, but the subindex on their view of the current situation for their own family jumped to a four-month high of 95.0.  Most important, the subindex on consumers' willingness to purchase durable goods surged to 75.4, almost erasing its steep declines over the previous three months.

The report was released on Thursday by INEGI, the official statistics agency.

Comment:  Mexico's consumer confidence index is designed so that readings of 100 reflect the level of optimism in 2003.  The increases in February and March probably reflect a natural rebound after new sales taxes caused a bout of sticker shock among consumers in January.  Consumers are now probably starting to get used to the higher prices they are seeing on a wide range of goods.  On top of that, some recent indicators point to somewhat stronger hiring in manufacturing, construction, and government.  If these trends continue, optimism is likely to rebound further.  The question is whether and when any rise in optimism would translate into a significant strengthening in consumer spending.  Stronger consumption demand is probably one requirement for Mexico to return to faster economic growth.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1403

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