Mexico: Consumer confidence deteriorates further in March
Consumer sentiment continued to trend downwards in March despite the United States’ more conciliatory tone regarding NAFTA, decelerating inflation, a tight labor market and a peso well off its December lows. The seasonally-adjusted index of consumer confidence produced by the Statistical Institute (INEGI) eased to a one-year low of 84.5 in March from the revised 84.7 figure recorded in February (previously reported: 85.0).
March’s decline largely reflected consumers’ more downbeat assessment of both their current and future household economic conditions. Their views on current household conditions hit an over one-year low in March, a puzzling development considering the recent slowdown in inflation, solid remittance inflows and healthy employment conditions. Similarly perplexing was consumers’ appraisal of both current and future general economic conditions, which improved over February’s reading and thus indicates that electoral uncertainty did not play a big role in March’s subdued print.
Notwithstanding March’s decline in confidence, consumer-related fundamentals have mostly improved since the start of the year, pointing to an eventual turnaround in consumer sentiment. Confidence should also improve as political noise related to the upcoming general election and NAFTA talks dissipates, which ought to reflect in a pick-up in private consumption and a recovery in fixed investment levels. Nonetheless, uncertainty remains high on the political front, with Donald Trump likely to continue stirring tensions between the U.S. and Mexican administrations.