Argentina: Consumer sentiment recovers slightly in July
July 26, 2017
In July, the Universidad Torcuato di Tella (UTDT) consumer confidence index rose from June’s 42.0 to 42.5. The index is nevertheless still below the 50-point threshold that separates pessimistic from optimistic sentiment, where it has been firmly entrenched since February 2015. Consumers are reacting with some volatility to recent economic news, as despite being back on track, the economy still suffers from numerous imbalances stemming from the previous administration’s economic policies, such as widespread unemployment, high inflation and a large fiscal deficit. The latest available data shows that unemployment rose significantly in Q1 2017, despite the economy accelerating and registering its third quarter-on-quarter expansion in a row. Moreover, the tight stance of the Central Bank, albeit effective in bringing down inflation, may be weighing on consumer sentiment.
In July, consumers were far more willing to make major purchases than in the previous month, especially of houses and cars, which bodes well for private consumption. On the other hand, their outlook regarding their future personal situation deteriorated somewhat and their assessment of the country’s short-term macroeconomic prospects weakened substantially, probably influenced by the mixed signals sent by the economy. However, their assessment of the country’s long-term macroeconomic prospects improved, a signal that consumers are more confident that current economic policies will eventually bear fruit.