Mexico: Mexican consumers become more pessimistic in February

In February, confidence among Mexican households declined sharply, reflecting ongoing economic trouble and bad news from authorities. The unadjusted index of consumer confidence elaborated by INEGI fell from 92.5 in January to 88.7 in February, which marked the lowest confidence level in two years. Although a drop in the index was foreseen by the markets, the magnitude of the fall was a surprise, as markets had expected the indicator to fall to 91.7.

The drop in February reflected a broad-based deterioration. Looking at the details, Mexican households reported a less satisfactory assessment regarding their current economic situation and a much more pessimistic opinion regarding their future economic prospects. Consumers’ economic expectations fell in February to a level last observed in January 2014. Moreover, consumers’ appraisal of the country’s economic situation was more pessimistic compared to the previous month, with the sub-indicator falling to a six-month low. Finally, consumer’s opinion regarding the country’s economic prospects in the 12 months registered a dismal drop in February, with the sub-indicator falling to the lowest level since December 2008. The February survey also showed that consumers were more pessimistic regarding their ability to buy big-ticket items.

The deterioration in consumer sentiment in February likely reflected the domestic headwinds prevailing at the time, namely lower oil prices and a weaker peso. But the sharp drop in sentiment was exacerbated by concerns related to the domestic impact from a gloomier global environment and the recent policy measures announced by Mexico’s Ministry of Finance (Secretaria de Hacienda) and the Central Bank (Banxico) to tightening both the monetary and fiscal policies.

Panelists participating in the LatinFocus Consensus Forecast expect private consumption to grow 3.1% in 2016, which is unchanged from last month’s projection. For 2017, panelists see private consumption increasing 3.3%.