The confidence index posted its first increase after the sharp drop in February
The consumer confidence index is a valuable indicator for economies, such as Mexico, in which private consumption makes up a large part of GDP. Approximately 2/3 of its GDP come from household consumption, so this indicator is particularly important for Mexico.
The seasonally adjusted index increased 1.42% in April, reaching 95.7, slightly higher than the 95.4 from March. Nonetheless, this value is still 1.5% below the level from April 2012.
The index is composed of five questions, two of which gauge the current situation of the household and the country, while another two gauge the 12-month outlook for the household and the country; the last one tests how willing consumers are to buy durable goods (e.g. cars, big domestic appliance, and other goods with a useful life over three years). This last indicator is important since consumers tend to delay big-ticket purchases and favor saving when their situation and outlook are past a certain level of pessimism.
Divergence in responses
While the 12-month outlook for the country increased a solid 4%, the 12-month outlook for the household dropped 1.5% versus the previous month. In a sense, this reveals that people may be observing change and recovery but do not see themselves fully benefiting from it. If recovery does continue, this perception is likely to change.
Another divergence is that, despite the current and 12-month household outlook dropping 1.5%, the current situation perception increased by that same amount, and the likelihood to buy durable goods increased 2.7%. It may be that the situation has improved enough to put households over the threshold of delaying purchases, which means they are more likely to start buying.
It seems that households feel the situation has improved for them, though the consumer is not confident enough that the recovery they foresee coming will spill over fully to them. Nonetheless, the important part is that the outlook looks good and consumers are now willing to spend, which should help boost recovery.
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