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
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
Patrick Fearon, CFA
Vice President, Fund Management