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
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