Mexico’s consumer confidence spikes in December

Mexico Consumer ConfidenceEnlarge GraphConsumer confidence is an important economic indicator of the health of an economy and is used as a leading indicator of economic performance by economists and investors. It is commonly measured by consumer confidence surveys, which aim to quantify consumer sentiment by asking questions that compare the current state of the economy versus a previous period. By aggregating a large number of qualitative questions, the consumer sentiment can be quantified and assigned a score to  calculate an index that can be compared to previous periods.

The Mexican Institute for Statistics and Geography (INEGI) publishes several surveys, including a consumer confidence survey. This survey quantifies the consumer’s perception of the economy and it is an important gauge of the consumer sector. If consumers are doubtful about the economy, they are likely to save and postpone spending, potentially delaying a recovery. Conversely, if consumers are optimistic, then they will spend more and hopefully jump start the economy.

The November 2012 values for the Mexican consumer confidence survey marked the highest level since March 2008, establishing a clear up trend. Out of the five survey questions, four showed strong increases, with the exception of the question related to the intention to purchase durable goods, which showed a marginal decrease.  The jump in consumer confidence is positive for the Mexican economy, which had shown signs of a slowdown a few months earlier. Private consumption is key to the recovery of an economy and this latest datapoint paints a very favorable outlook for Mexico.

This survey is a key data point for investors in the iShares MSCI Mexico Index Fund (EWW) or the locally traded iShares NAFTRAC (MEX:NAFTRAC). It may also impact an overall trend for investors looking at Latin America as a whole through iShares S&P Latin America Fund (ILF) and SPDR S&P Emerging Latin America ETF (GML), all of which have approximately 25% exposure to Mexico.