MexECON Blog

January Consumer Confidence Falls Further

Mexico's January consumer confidence index fell to a seasonally-adjusted 91.8, after revised readings of 92.7 in December, 94.5 in November, and 91.6 in October.  According to the report, the decline in January came in large part from a sharp decrease in the subindex on consumers' willingness to buy durable goods.  That subindex pulled back to 78.3, though the decline erased only part of the subindex's strong gains over the previous four months.  Perhaps more significantly, the subindex on consumers' view of the current situation for the country as a whole continued its recent decline, reaching a five-month low of 89.1.  The subindex on consumers' view of the current situation for their own family fell only slightly to 99.4, while the subindex on their future expectations for their own family fell to 100.5.  On a more positive note, the January subindex on consumers' future expectations for the country rose modestly to 93.0.

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.  The index fell sharply over the course of 2013, mostly in anticipation of new sales taxes scheduled to take effect in January 2014, but the index has trended higher ever since then.  Much of the recovery in optimism has reflected consumers adjusting to the new taxes.  Just as important, the Mexican labor market has finally started to firm noticeably.  I am therefore not too concerned about the modest correction in optimism over the last two months.  That pullback can probably be traced to the recent decline in global oil prices and the resulting weakness in the peso.  I suspect that improving job prospects will soon trump those concerns.  So long as Mexican exports continue to march upward and private investment remains in recovery, unemployment will probably continue to fall, and consumer optimism will probably resume its upward trend.

Patrick Fearon, CFA
Vice President, Fund Management

Consumer Confidence 1501

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