October Decline in Mexico’s Private Spending Exceeds Expectations, Signals Weakness

Private consumption in Mexico faced a troubling start to the fourth quarter of 2024, experiencing a 0.7% decline in October compared to September.

This marked the second consecutive month of decrease, following a 0.4% drop in September. The data was reported by the National Institute of Statistics and Geography (INEGI).

The October decline exceeded expectations, as INEGI had predicted only a minor reduction of 0.1% in its timely private consumption indicator. Year-over-year, private consumption remained positive with a growth of 0.5%.

However, this figure was significantly lower than the 1.6% increase seen in September and far from the peak of 6.2% recorded in March. The monthly decline reflected decreases in both domestic goods consumption and imported goods consumption.

Domestic goods consumption fell by 1%, while imported goods consumption decreased by 0.5%. This trend indicates a broader weakening in consumer confidence and spending habits.

October Decline in Mexico’s Private Spending Exceeds Expectations, Signals Weakness. (Photo Internet reproduction)

Inflationary pressures contributed to this decline, as the annual variation of the National Consumer Price Index reached 4.76% in October. This was an increase from 4.58% in September.

Additionally, international remittances fell by 1.6%, totaling $5.723 billion, while formal employment creation slowed dramatically, showing a 20.3% drop—the sixth consecutive month of declining job creation.

Private Consumption Trends and Economic Outlook

Despite these challenges, INEGI reported an overall positive growth of 3.5% in private consumption from January to October. However, this was lower than the 4.3% growth observed during the same period in 2023.

The slowdown is attributed mainly to diminished momentum in service consumption, which has significantly decreased from a growth rate of 4.4% last year to just 2.2% this year.

Looking ahead, INEGI anticipates a slight recovery in private consumption for November and December. It projects a monthly increase of 0.6% for November and a marginal rise of 0.1% for December.

Given that private consumption constitutes about 70.4% of GDP as of September, its performance is crucial for economic stability. It will also play a key role in driving growth moving forward.