Background on the Instituto Nacional de Geografía y Estadística (INEGI)
The Instituto Nacional de Geografía y Estadística (INEGI) is Mexico’s official statistics agency, responsible for producing and publishing official statistics on various economic indicators. INEGI’s Indicador Oportuno del Consumo Privado (IOCP) is an experimental, econométrically estimated measure that provides a timely assessment of private consumption trends in Mexico.
Recent Consumption Performance
Following a surprising 1.2% monthly increase in February, the IOCP reported that private consumption in Mexico contracted by 0.2% in March and further decreased by 0.1% in April, compared to the previous month. This trend marks a return to decline after a brief uptick in February.
If INEGI’s projections materialize, private consumption would have experienced four consecutive monthly declines over the past six months. Moreover, considering annual comparisons, the IOCP anticipates a 1.3% and 1.1% drop in March and April, respectively, leading to five consecutive months of negative growth.
Weak Fundamentals
According to INEGI data, the deseasonally adjusted consumer confidence index fell by 0.4 points to 45.9 in March, marking five consecutive monthly declines and reaching its lowest level since October 2023. Although formal job creation totaled 34,179 positions in March, this figure was inflated by having more working days due to the delayed celebration of Easter in April 2024. Consequently, job creation, when compared to comparable March periods, was the lowest since 2009.
Impact on Mexican Economy
Private consumption is a crucial component of Mexico’s GDP, accounting for roughly 60%. The recent decline in consumption could negatively affect economic growth, as reduced spending by households may lead to lower investments and slower overall economic activity.
Moreover, the weakening consumer confidence could further dampen spending, creating a vicious cycle that might prolong the economic slowdown. This situation is particularly concerning given Mexico’s ongoing efforts to recover from the economic challenges posed by the COVID-19 pandemic.
Key Questions and Answers
- What is the Indicador Oportuno del Consumo Privado (IOCP)? The IOCP is an experimental, econométrically estimated measure by INEGI that offers a timely assessment of private consumption trends in Mexico.
- Why is the recent decline in private consumption concerning? Private consumption accounts for about 60% of Mexico’s GDP. A decline in spending by households can lead to lower investments and slower overall economic activity, potentially affecting economic growth.
- How does the weakening consumer confidence impact the economy? Weakening consumer confidence can further reduce spending, creating a vicious cycle that may prolong economic slowdowns. This situation is especially concerning as Mexico continues to recover from the economic challenges posed by the COVID-19 pandemic.
