Mexico Consumer Confidence Falls to Lowest Since 2010 on Taxes

Mexico’s consumer confidence unexpectedly plunged to its lowest level since April 2010 after new taxes cut into disposable income, potentially damping the outlook for growth, according to Barclays Plc.

The index fell to 84.5 in January from 89.7 in December, the national statistics institute reported today, lower than the 90.1 median estimate of 10 analysts in a Bloomberg survey. Confidence has fallen from 98 in July of last year.

Mexico’s economic growth is expected to rebound to 3.42 percent this year after slowing to 1.28 percent in 2013 as the government boosts spending and the U.S. economy improves, according to a separate Bloomberg poll. New taxes on junk food and higher sales levies in regions bordering the U.S. may hurt the recovery, said Marco Oviedo, Barclays’s chief Mexico economist.

“Stronger than expected effects of higher taxes in private consumption could pose some downside risks to growth,” Oviedo said in an e-mailed response to questions.

The confidence index is the latest indicator of weakening growth in Mexico. The seasonally adjusted purchasing managers’ index for manufacturing fell to 49.7 in January from 50.3 the previous month, the Mexican Institute of Finance Executives reported yesterday.

The economic activity indicator IGAE slid 0.04 percent in November from a year earlier, according to the statistics institute.

The deteriorating outlook led Standard Chartered Plc (STAN) to lower its 2014 growth forecast to 3 percent from 3.8 percent yesterday.

An 8 percent tax on junk food took effect Jan. 1, along with an increase in sales taxes near the border to 16 percent from 11 percent.

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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