Mexico’s consumer sentiment likely to have dropped further in January

Mexican consumer sentiment is expected to have dropped further in January. Deteriorating expectations for business conditions has led to consumer sentiment dropping to its worst level in more than six years. Expectations about business conditions have dropped to the lowest level in the history of this series. With the still-strong labor market, it might be noted that this sharp fall is due to the worsening trade outlook after the U.S. Presidential election, noted Societe Generale in a research report.

There is likelihood that the growth outlook moderation and the recent acceleration in inflation or the peso depreciation has taken a toll on consumer sentiment. The extrapolated rate of fall in the overall index translates into an index value of 83.7 in January, and the near-term movement in sentiment would probably be subject to changes to Mexican policy discussion with the U.S., added Societe Generale. Lower confidence and higher inflation might impact consumer spending growth in the next few quarters.