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Mexico July Consumer Confidence Unexpectedly Falls
 Jason Lange & Caroline Stauffer - Reuters
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August 04, 2010
Mexico City - Mexico's consumer confidence index unexpectedly fell in July for the first time in five months in a potential setback to the country's recovery from recession, data from the national statistics agency showed on Wednesday.
The index edged down to 87.4 from 87.5 in June. Analysts had forecast the index would rise to 88.3.
Mexico is limping back from one of the deepest economic contractions seen anywhere in the world last year. While unemployment has recovered some in recent months, it is still well above pre-recession levels.
Consumers said they were more optimistic about Mexico's economy but felt less able to make purchases of household goods.
"I would like to buy a radio but my budget won't allow it," said Cesar Tellez, who recently lost his second job selling newspapers on a street corner.
Mexico's economy shrank 6.5 percent in 2009 and the central bank thinks the economy will grow at most 5 percent this year.
Manufacturing, which tends to drive Mexico's economic cycles, is slowing as the faltering U.S. recovery hits demand for Mexican exports like car, televisions and refrigerators. Mexico sends about 80 percent of its exports to the United States.
Growth in output at Mexican factories slowed in May for the fifth time in six months, according to a trend reading calculated by the national statistics agency.
Many economists expect consumer spending will take up some of the slack in the second half of the year, but Wednesday's data could dent that view.
At the same time, the consumer confidence index is not as predictive of future retail sales in Mexico as it is in the United States.
"Clearly this is not good news," said London-based economist for Capital Economics, Neil Shearing, who expects Mexico's economic growth rate will slow sharply to around 2.5 percent in 2011.
"The real danger in Mexico's recovery is that it has been highly unbalanced in the sense that it's all been driven by industry," he said.
Seasonally adjusted consumer confidence fell to 86.8 from 87.3 in June.
While faster growth in Brazil, Peru and Chile has led policymakers in those countries to raise interest rates this year, Mexico's central bank is expected to keep interest rates low into next year.
Some economists think Mexico's economy will not rebound to its peak 2007 level until 2012.
(Additional reporting by Robert Campbell; Editing by W Simon)
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