Mexican consumer sentiment likely to have remained low in August

Mexico’s consumer sentiment is struggling in spite of declining jobless rate. The seasonally adjusted variant of the consumer sentiment index had sharply fallen in July to the lowest levels since early 2014. Meanwhile, the non-adjusted index also dropped sharply. Consumer sentiment in Mexico has remained stagnant at best in the last three years and recent drop signals at what will come in future as the economy has begun decelerating noticeably. Consumer confidence index is likely to have remained low at 88.6 in August, said Societe Generale in a research note.

The decline in the sentiment index seems a tad confusing as the labor market continues to rebound, albeit modestly. However, it is mostly related to the deterioration in business sentiment. Admittedly, the main reason for the fall in index was the decline in expectations regarding business conditions, according to Societe Generale.

Given that inflation is expected to accelerate further, consumer sentiment as well as spending is expected to come under rising pressure. Therefore, the deteriorating sentiment is roughly in line with the growth outlook. The Mexican economy and consumer spending is expected to peak in 2016 and moderate next year, added Societe Generale.