After bottoming in Q1 14, Mexico's consumer confidence has slowly strengthened on the back of thedecline in the unemployment rate and the modest economic recovery of the past few quarters.
With the fall in inflation helping real wage growth and the growth outlook staying positive, analystsexpect this process to continue throughout the year, albeit at a mild pace.
According to Societe Generale, the consumer confidence index is expected to rise to 92.8 in March, pulling up the six-month average to 91.9. The seasonally adjusted index should rise to 93.4, the highest reading since November last year. However, the figure remains below its cyclical peak in 2012.
The biggest challenge to consumer confidence over the next few months could come from the labour market. The recent improvement in the unemployment rate has come on the back of a decline in the labour force, and it is possible that the labour market situation will not improve in the coming months.
"As a result, we do not expect a strong pick up in consumer confidence any time soon, andconsumption growth will therefore take time to improve from its current sub-trend rate", says Societe Generale.
