The perception of Mexico’s economic situation and consumer expectations have declined at the beginning of the second half of the year. This is due to a context marked by low growth and persistent inflationary pressures, a scenario that experts do not anticipate changing in the short term.
Decline in Consumer Confidence
In July, the Consumer Confidence Indicator (ICC) fell to 46.9 points, a decrease of 0.4 points from June, according to seasonally adjusted figures released by the National Institute of Statistics and Geography (INEGI). This decline was driven by a general downturn in the indicator’s components, reflecting the complex economic landscape Mexican consumers are navigating. Inflation has reached 5.57 percent, and the loss of dynamism in key economic sectors has led to two consecutive months of declining domestic consumption.
“Inflation, which has been rising for five months, is damaging the pockets of Mexican families, especially those of the most vulnerable households, which spend a higher percentage of their income on food purchases,” highlighted the organization Mexico, How Are We Doing? In July 2024, food prices showed an annual increase of 7.98 percent.
Impact on Economic Expectations
The current economic outlook has resulted in a sharp decline in expectations about Mexico’s economic situation over the next 12 months. This has influenced consumer decisions, making actions such as purchasing a car in the next two years or building or remodeling a house less feasible for the average Mexican consumer.
Despite this reduction, the ICC has remained around 47 points for the past 12 months, above the historical average of 40.1 points and just 1.5 points below the historical maximum of 48.5 points in February 2019, according to Citibanamex’s economic research department.
Consumer Resilience in a Challenging Environment
In recent months, millions of mothers, workers, and other consumers in Mexico have faced a challenging economic environment. The increase in prices, reduced economic dynamism, and uncertainty about Mexico’s future have significantly altered the economic scenario perceived at the beginning of this year.
Earlier this year, market analysts predicted that the country’s Gross Domestic Product would grow by 2.4 percent, coinciding with the ICC at 47.1 points. However, the current state of the indicator reflects a context where the economy is expected to grow by only 1.7 percent.
Despite recent fluctuations in the national economy, consumers have adapted to the changing landscape by adopting strategies such as searching for more deals or buying in bulk, according to consultancy Kantar Mexico. “During this six-year period, except for the most critical months of the pandemic, consumer sentiment has tended to be above estimates in contrast to past governments,” noted a non-profit organization regarding consumer confidence in recent years.
Future Outlook for Mexican Consumers
With low growth expectations predicted for Mexico this year and their reflection in the sluggish dynamism of various economic variables affecting consumption, it is anticipated that consumer confidence may diminish further. This is already indicated by the complementary indices of the National Survey on Consumer Confidence.
“Going forward, we foresee a possible slowdown in private consumption, resulting from the estimated relaxation in the labor market and the lower expected economic activity,” warned the Citibanamex economic research department about the future outlook for the Mexican consumer.
The persistence of inflation and low economic growth continues to challenge Mexican consumers, highlighting the need for strategic adjustments and resilience in the face of ongoing economic uncertainty.
