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News Article

Private Consumption Continues to Slip

By Cinthya Alaniz Salazar | Tue, 11/09/2021 - 12:38

Mexico’s economic dynamism suffers as households’ consumption of goods and services fell for the third consecutive month in August, reports the National Institute of Statistics and Geography (INEGI).

This internal market insight could partially explain Mexico’s slowed economic performance after the national economy contracted 1.6 percent during this same month, according to Nearshore Americas. Decerning the direct cause of this apparent slow down is difficult considering it could attributed to the third COVID-19 wave in Mexico and/or high inflation rates caused by continued supply chain disruptions and increasing input costs.

Superficially, this trend contradicts domestic employment gains, which in some cases had surpassed pre-pandemic levels. This, however, fails to account for the 4 million people that that were pushed into poverty between 2018 and 2020. Altogether, these factors collectively paint a more holistic picture of the economic reality in Mexico, which in turn has resulted in weak domestic demand presenting an additional decline in consumption of 0.62 percent in August, reports the institute.

With February 2020 serving as a benchmark to pre-pandemic performance, the agency’s consumption indicator shows a contraction of 3.53 percent. Notably, the index "measures the behavior of spending by households resid[ing] in the country on consumer goods and services, both of national and imported origin, although purchases of homes or valuable objects are excluded," said the report.

Imported goods where disproportionately impacted, observing a 6.8 percent contraction—its worst decline since May 2020. This is a stark difference in comparison to domestic goods, which only observed an additional 0.1 percent decrease at a monthly rate, indicating a clear preference for national goods over imported ones. Nevertheless, private consumption increased 9.6 percent from year to year for both national and international goods.

Companies and economists alike are looking forward to the economic boost provided by the holiday season, which began early in many parts of the world in order to incentivize consumer engagement. Although this could potentially help mitigate the effects of at least the third COVID-19 wave, persistent bottlenecks and supply chain disruptions could undermine recovery projections. 

Photo by:   Jezael Melgoza
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Cinthya Alaniz Salazar Cinthya Alaniz Salazar Journalist & Industry Analyst