MexECON Blog

Consumer Confidence Continues to Improve

Mexico's May consumer confidence index rose to a seasonally-adjusted 90.4, after revised readings of 89.7 in April, 89.5 in March, and 86.8 in February.  With increases in each of the last four months, the index is now at its highest level since last November.  According to the report, the rise in May stemmed from increases in four of the five subindexes.  The subindex on consumers' view of the current situation for their own family jumped to a nine-month high of 97.7, compared with just 95.9 in the previous month.  The subindex on their view of the current situation for the country as a whole rose to a six-month high of 88.9.  Both current-situation subindexes have now risen for four straight months.  Meanwhile, the May subindex on consumers' future expectations for their own family increased only modestly to 99.5, while the subindex on their future expectations for the whole country jumped to 91.3.  The May subindex on consumers' willingness to buy durable goods was unchanged at 75.2.

The report was released today 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.  Confidence fell sharply in January, when new sales taxes took effect, but the consistent increases over the last four months provide conclusive proof that consumers are now adjusting well to the increased duties.  That could encourage somewhat stronger consumer spending in the coming months.  Nevertheless, hiring is improving only slowly, and Mexico's unemployment rate seems to have stopped falling.  That is a problem because continued stagnation in the labor market would probably limit the potential gains in consumption demand.  It is therefore too early to look for a robust, sustained rebound in Mexican consumer spending, and that will probably keep the country's economic growth relatively muted in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1405

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