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Private Consumption in Mexico Rose Moderately in 2014

Private Consumption in Mexico Rose Moderately in 2014

Posted by Diego Hidalgo on March 04, 2015

Private consumption in Mexico increased moderately last year, roughly in line with growth in the economy, although December saw a slowdown as spending declined from November.

Private consumption in December was down 0.5% seasonally adjusted from November, and rose 2.2% in the full year, the National Statistics Institute said Wednesday. Gross domestic product last year expanded 2.1%.

Consumption of imported goods fell 1.9% in December, while consumption of domestically produced goods and services fell 0.5% from the previous month.

The sharp drop in international gasoline prices likely contributed to lower consumption of imported goods in Mexico, said Bill Adams, senior international economist for PNC.

“We’ve seen a dip globally in consumption reflecting lower spending on gasoline, which is a good thing,” he said. Mexico imports around half of the gasoline that it consumes. Spending in other areas is likely to pick up in 2015 as output improves and consumers become more willing to spend, Mr. Adams added. “The Mexican consumer sector is OK, but not great.”

Scotiabank said in a report that the peso’s sharp depreciation against the U.S. dollar—the currency fell about 5.7% in December and 11% in 2014—likely had an effect on consumption of imported goods. Imports of non-oil consumer goods fell 0.8% in December from November, while petroleum imports, including fuels, fell 13%.

Last year’s tax increases, including new levies on consumer goods such as soda and junk food, are widely thought to have had a negative impact on consumption at the start of the year. Nevertheless, levels of household spending in recent years have been below what might be explained by the tax overhaul and employment growth, economist Jonathan Heath wrote in the Reforma newspaper.

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