MexECON Blog

Consumer Confidence Declines in April

Mexico's April consumer confidence index declined to a seasonally-adjusted 90.8, falling from a revised 92.8 in March and reaching its lowest level since last summer.  According to the report, the decline in April reflected weaker readings for all five subindexes.  The subindex on consumers' view of the current situation for the country as a whole dropped to a 13-month low of 87.4, while the subindex on their future expectations for the country fell to a 9-month low of 88.5.  The subindex on consumers' view of the current situation for their own family also declined, but only to 98.5, and the subindex on their future expectations for their family dipped to 99.1.  The April subindex on consumers' willingness to buy durable goods posted the worst performance, dropping all the way to 82.1 from 84.9 in March.  However, that subindex is often volatile, and the reading for April was still above the most recent low of 80.0 in January.

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.  The index has been trending upward since the beginning of 2014, but it seems that optimism has taken a significant hit from the recent softness in Mexican exports, manufacturing activity, and construction, as well as the government's budget cuts in response to lower oil prices.  Those problems are likely to persist for a while yet, but I don't expect them to turn into a serious economic downturn.  I believe they will ultimately turn out to be temporary problems.  The more significant threat is how the economy and the Mexican policymakers respond to the likelihood of higher U.S. interest rates later this year.  If that issue is handled well, I expect the recent strength in the Mexican labor market to buoy confidence and consumer spending, which should support continued economic growth.

Patrick Fearon, CFA
Portfolio Manager

Consumer Confidence 1504

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