Friday, June 14, 2024

Consumer confidence up in May

Consumer confidence increased slightly in May compared to April, after falling in each of the two previous months.

The national statistics agency Inegi reported Monday that the consumer confidence index (ICC) rose 0.3 points to 44.4 in May. The figure is 0.8 points higher than in May 2022.

Mexican peso and US dollar
Declining inflation and record-low unemployment have slowly increased consumer confidence in the first half of 2023. (Rmcarvalho/Istock)

The month-over-month and annual increase in the ICC coincided with a decline in annual inflation to a 20-month low of 6% in the first half of May. Another factor that likely contributed to increased consumer confidence is record-low unemployment of 2.7% in the first quarter of 2023.

Inegi, in conjunction with the Bank of Mexico, conducted its consumer confidence national survey at 2,336 homes in cities across all 32 federal entities during the first 20 days of May.

It asked respondents about:

  • Their current economic situation compared to a year earlier.
  • Their expected economic situation over the next 12 months.
  • Their opinion about Mexico’s current economic situation compared to 12 months earlier.
  • Their opinion about Mexico’s expected economic situation over the next 12 months.
  • Their current capacity to purchase furniture, a television, a washing machine and other home appliances compared to their capacity 12 months earlier.
The biggest driving factor of Inegi’s survey was respondents’ confidence to purchase a home appliance, like a washing machine. (Wikimedia Commons)

Their responses — derived from the options of much better, better, the same, worse and much worse with regard to the first four questions, and greater, the same or lesser with respect to the fifth — were weighted and used to formulate the ICC score.

The biggest drivers of the month-over-month increase in consumer confidence were improvements of 0.7 points in the sub-index that measures perceptions about the national economy compared to a year earlier and that which assesses the current capacity of respondents to purchase a home appliance.

However, the score for the home appliance sub-index — 27.2 — remained well below the other four.

Three other sub-indexes also increased on a month-over-month basis, but only by 0.3 points in the case of respondents’ current economic situation, and by just 0.1 points with regard to both respondents’, and Mexico’s, expected economic situation over the next 12 months.

Respondents felt in the month of May that they had more capacity to save money or spend on a vacation, but less capacity to spend on food, clothing and shoes, suggesting that respondents may still be adjusting to a rising cost of living. (Daniel Augusto/Cuartoscuro)

The only sub-index with a score above 50 — a level which indicates optimism among consumers — was respondents’ expected economic situation over the next 12 months.

Despite the overall increase in consumer confidence, a “complementary indicator” that measures people’s capacity to buy food, clothes and shoes fell, as did one that assesses plans to buy, build or renovate a home in the next two years. An indicator that gauges the expected employment situation over the next 12 months also declined.

However, seven other complimentary indicators rose, including those that measure people’s economic capacity to go on vacation within the next 12 months, their current capacity to save part of their income and their intention or lack thereof to buy a new or used car in the next two years.

With reports from El Financiero and El Economista

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