Consumer confidence is improving... but beware!

The Consumer Confidence Index, published by INEGI, has already a year with a growth trend. As in other analysis I have shared, these are good news, but let’s give it a little context.

The good news started by the end of 2008, beginning of 2009, when people felt that the economic situation at home and in the country was worse than a year before, but they also thought that it would improve in the following 12 months; this means people began to see the light at the end of the tunnel.

Later, by the end of 2009, people began to feel that the economic situation was already better than the previous year, at home as well as in the country; this increased consumer confidence.

However, there is another indicator within the index, that gives a different nuance: when people is asked about the chances to buy durable goods (home appliances, furniture, etc.), they show a lot more cautious attitude. In other words, people has each time more confidence on the economic situation, but not as much as to make big purchases. The result is that, although the positive trend, the confidence index is on its lowest levels of the last 10 years.

How has this confidence affected economic activity? Data shows that retail sales have almost reached the same level they had at the beginning of 2008, but with very uneven results. For example, there are sectors with sales levels superior to 2008:

·         Food, beverages and tobacco

·         Supermarkets and department stores

·         Textile products, dressing accessories and footwear

·         Health-care products

But, on the other hand, there are sectors that are below 2008 levels:

·         Stationery, recreation products and other personal-use products

·         Furniture, household equipment, computers and interior decoration articles: this sector is in the lowest levels of the last 10 years!

·         Hardware articles and glass

·         Motor vehicles, spare parts, fuel and lubricants

To summarize, consumers' reactivation is focused on sectors that cover basic needs (health, food, dressing), but the employment situation (analyzed previously, on http://beammx.blogspot.com/2010/11/employment-in-mexico-improvements-but.html) shows a weak market for durable goods. If your company or employment is on this sector, I suggest one of three ways:

1.       Adapt your offer to make it more affordable (financing, designs to make it cheaper without losing quality, etc.)

2.       Find specific niche markets that may have attractive dynamics

3.       Look outside domestic markets. A possibility is to think about emerging markets, with growth forecasts beyond 5%, and take advantage of trade agreements Mexico may have with them.