Mexico: Consumer sentiment improves further in August
September 5, 2017
Sentiment among Mexican consumers rose in August, reaching an over one-year high and extending the streak of consecutive improvements in consumer confidence seen since Donald Trump’s inauguration in January 2017, when sentiment had slumped to a record low. The seasonally-adjusted index of consumer confidence produced by the Statistical Institute (INEGI) rose to 87.6 in August—the highest reading since June 2016—from 86.9 in July.
The report showed a broad-based increase in sentiment. Consumers were more upbeat regarding both the current and future economic situation of the country, which was in line with a tight labor market, the recovery of the peso and the diminished risk of an adverse renegotiation of NAFTA. Consumers’ assessment of both their current and future household situation also improved in August. The only sub-component to experience a decrease was Mexicans’ propensity to purchase big-ticket items, which eased slightly in August from the previous month. This reflects the effects of inflation, which continues to accelerate despite Banxico’s tight policy stance.
Although the index remains subdued by historical standards, the gradual but steady improvement in consumer confidence seen since January highlights the resilience of the Mexican domestic economy, which has stood up to myriad challenges and has continued to grow at a healthy clip. Despite the recovery in sentiment, however, there is reason to believe that private consumption will moderate in the quarters ahead as households feel the pain of multi-year high inflation.
Author: David Ampudia, Economist