Deteriorating Mexican business expectations continue to hurt consumer sentiment

Consumer sentiment in Mexico has been struggling as business expectations have dropped sharply. Consumer confidence has dropped to its worst level in more than six years, owing to the deteriorating expectations in business conditions. Business conditions expectations have dropped to the lowest level historically.

Given the still-robust labor market and comparatively modest inflation, it might be argued that this sharp drop is attributed to the ongoing political and policy-related rhetoric in the U.S. with the likelihood of considerable implications for Mexico’s trade and businesses, said Societe Generale in a research note.

There is also the likelihood that the deterioration in the growth outlook has begun adversely impacting consumer sentiment. The current rate of decline in the overall index translates into an index value of 84 in October and the near-term movement in sentiment would possibly be subject to the U.S. election results, added Societe Generale.

Lastly, with inflation expected to accelerate, both consumer spending and confidence would come under rising pressure. Mexican consumer spending and economy have likely peaked and are expected to slow down in the future, according to Societe Generale.