Consumer confidence stalled in May amid high inflation

The high levels of inflation that have occurred in recent months seem to have had an effect on the sentiment of Mexican families regarding the current economic situation, according to the latest data from the National Institute of Statistics and Geography (Inegi).

In May, the Consumer Confidence Indicator (ICC) reported a level of 44.2 points, which did not show any difference with the score recorded in the previous month, while in its annual comparison it advanced 1.4 points, the least advance that It has been registered since March 2021.

According to Gabriela Siller, director of Economic and Financial Analysis at Banco Base, the stagnation in May is due to the fact that Mexican households are still evaluating the effects, both positive and negative, of the economic recovery, which has been slow and has been extended to this year.

“On the positive side, the economy continues to recover along with the labor market. However, the recovery has been slow and inflation has risen significantly in the last year, which deteriorates the population’s consumption expectations”, added the analyst.

In the first half of May, consumer inflation slowed to 7.58% annually; however, the pressures and uncertainty around it continue.

“Going forward, there is a risk of a deterioration in consumer confidence in the prospects at the household level and in the consumption of durable goods, due to the fact that high inflation and the slow recovery of the labor market have deteriorated the population’s consumption capacity. ”, Gabriela Siller pointed out.

Meanwhile, Marcos Daniel Arias, an analyst at Monex, pointed out that consumer confidence is close to 45 points, a level that is historically difficult to overcome, so confidence could be reaching a zone of stability.

“Consumer Confidence has advanced steadily and now, given the proximity to traditional limits, it will be difficult to see large fluctuations, which are the most indicative aspect to make inferences about the economy,” he said.

Shopping possibilities fall

Within the report, which the Inegi develops jointly with the Bank of Mexico (Banxico), it was observed that two of its five components showed a monthly decline, where the one that refers to the possibilities of purchasing durable goods stood out.

According to Mexican households, the possibilities at the present time to buy furniture, televisions, washing machines, as well as other electrical appliances, decreased 0.9 points in a monthly comparison.

Another indicator that saw a contraction, but to a lesser extent, was the current economic situation in the country, with a decline of 0.1 points.

At the other extreme, the indicator of the country’s future economic situation improved by 0.5 points. “It could be related to the lower visibility of negative news such as those linked to the war and the lockdowns in China,” said Marcos Daniel Arias.

The current economic situation of household members, meanwhile, improved by 0.3 points, while the future situation improved by 0.2 points.

Less optimism to save

In the complementary indicators of the ICC, it was observed that the one that has to do with the possibilities of saving was the one that marked the greatest decrease in the month, with 3.1 points less.

It was followed by the contraction of 0.6 points in the possibilities of buying clothes, shoes and food, and then the one that has to do with the perception that prices will decrease or increase in the coming months.

Meanwhile, the personal economic situation compared to that of a year ago deteriorated by 0.3 points and 0.2 points than expected in 12 months.

Mexicans showed a better perception of the employment situation, with an improvement of 0.9 points per month, while the future conditions to save improved by 0.5 points, while the possibilities of buying, building or remodeling a house advanced 0.4 points.

Regarding the possibilities of going on vacation, the indicator presented an advance of 0.2 points.

What is the Consumer Confidence Indicator?

It is a numerical value that results from averaging indices that refer to the current and expected economic situation of the household of the respondents, as well as the current and future economic situation of the country, and the possibilities for the purchase of durable consumer goods.

The results are obtained through the National Survey on Consumer Confidence (ENCO), which is carried out jointly by the Inegi and the Bank of Mexico in the 32 entities of the country.

• It takes place the first 20 days of each month.

• It is based on a sample of 2,336 dwellings.

• An interview is conducted with people over 18 years of age.

• The questionnaire consists of 15 questions.

In this way, the Inegi calculates what is known as Consumer Confidence, which measures the degree of optimism that consumers have about the economic situation.

Source: INEGI

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