MexECON Blog

June Consumer Confidence Rises to 91.3

Mexico's June consumer confidence index rose to a seasonally-adjusted 91.3, after revised readings of 90.6 in May and 89.9 in April.  The index has now risen for five straight months, leaving it at the highest level since last October.  According to the report, the rise in June came entirely from increases in two of the five subindexes.  The subindex on consumers' willingness to buy durable goods jumped to 76.4, while the subindex on consumers' future expectations for the country as a whole rose to 92.5.  In contrast, the subindex on consumers' view of the current situation for their own family fell slightly to 97.1, and the subindex on their future expectations for their own family edged down to 99.1.  The subindex on consumers' view of the current situation for the country dropped to 88.1.

The report was released on Friday 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 it has been recovering ever since.  Mexican consumers are clearly adjusting to the higher sales taxes.  Nevertheless, the fact that three of the five subindexes declined in June is telling.  As I warned after last month's confidence report, the labor market in Mexico is still soft, and that is keeping a lid on optimism.  Consumption spending and some other aspects of Mexico's domestic demand are therefore likely to remain relatively slow, offsetting some of the recent rebound in exports.  Mexican economic growth does seem set to accelerate modestly from its recent weak levels.  However, the problems in domestic demand will probably prevent growth from reaching truly impressive levels.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1406

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