MexECON Blog

Consumer Confidence Falls Further

Mexico's August consumer confidence index fell to a seasonally-adjusted 87.9, down modestly from the unrevised 88.1 reading in July, and well below the 90.4 reading registered in June.  In fact, the reading for August was the weakest since January and February, when consumers were dealing with a series of sales tax hikes.  According to the report, the decline in August came from decreases in just two of the five subindexes.  The subindex on consumers' willingness to buy durable goods dropped sharply to 72.8, for its lowest reading in six months.  The subindex on consumers' future expectations for the country as a whole fell to 87.2, for its lowest reading in more than five years.  In contrast, the subindex on consumers' view of the current situation for the country rose to 87.5, while the subindex on their view of the current situation for their own family jumped to 95.1.  The subindex on consumers' future expectations for their own family rose to 97.0.

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.  Throughout the spring and early summer, the overall index had been rising, suggesting that Mexican consumers were adjusting well to the new sales taxes.  Nevertheless, I have been warning that any gains in optimism could be limited by continued softness in the labor market and relatively high inflation.  Renewed volatility in the global financial markets and discomfort over President Peña Nieto's economic reforms are probably also weighing on confidence.  Continuing cautiousness among consumers will probably keep a lid on Mexican economic growth in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1408

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