Economics: Consumer confidence extends its slide as employment weakens; a further erosion of consumption is possible
Mexico’s consumer confidence index deteriorated in its latest reading, prompting some analysts to note that it foreshadows a greater deceleration of private consumption for the coming months. It is important to consider that the index allows anticipating the behavior of consumption in certain contexts, especially for the same month. That is because the consumer confidence index is published approximately four days after the close of the month in question (e.g., the March CCI was released April 4), while the private consumption index is published two months after the close of the specific month (e.g., the March private consumption index will be published on June 4).
Thus, we can expect private consumption to have remained weak in March. However, for the rest of the year, the most important factors will be the evolution of employment and the wage bill, and the flow of remittances. The latter faces external factors that are generating high uncertainty, both due to tariffs and their resulting brake on investment, as well as an immigration policy that could prevail for the rest of the year and the coming years.
In indicators released last week, it was announced that the Global Indicator of Economic Activity (IGAE) continued to show weak annual growth in February 2025 (0.5%). That brought the annual increase though the first two months of the year to 0.4%. Industry (0.4% ) grew annually that month, after having fallen five consecutive months. Both construction (0.5%) and manufacturing (1.8% yoy) were in the black. Although these are admittedly lackluster increases, they mark an improvement compared to six months of declines in construction and the -0.5% average drop recorded in manufacturing between Oct-24 and Jan-25. The increase in manufacturing is due in part to the significant rise in non-automotive exports to the US that month in order to bring forward sales and accumulate inventories in the US, given the uncertainty of possible future tariffs.
On the other hand, it was reported that 12-month consumer inflation for the first two weeks of April rose to 3.96%, almost matching last December’s 3.99% level. The core component rose significantly, to 3.9%, and the non-core component to 3.95%. The core reading is 21 basis points higher than at the end of December and has now risen consistently since the close of last January in what appears to be the start of a new upward trend.
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