By  on August 5, 2014

(Bloomberg) — Mexico’s consumer confidence index unexpectedly declined in July, signaling that the economy is struggling to recover from the weakest growth in four years.

The index fell to 90.5 from 91 the month before, the national statistics institute said today in a report on its website, less than forecast by any of the 13 economists surveyed by Bloomberg. The median estimate was 93.

The drop is the first since January, when President Enrique Pena Nieto’s government raised the sales tax in areas along the U.S. border to help wean the federal budget off oil revenue. The central bank unexpectedly cut the key interest rate in June by a half point to a record-low 3 percent after the economy at the start of the year expanded less than analysts forecast for the seventh time in eight quarters.

“Given how the external sector is picking up, given the fact that that government is increasing capital spending strongly, we would have expected to see more percolating down to domestic demand and investment,” Rafael de la Fuente, an economist at UBS AG, said in a phone interview from Stamford, Connecticut. “That’s disappointing, no question. It raises questions about the speed of the recovery.”

Mexico’s peso dropped 0.5 percent to 13.2565 per U.S. dollar at 8:56 a.m. in Mexico City and earlier touched the weakest intraday level since March.

Exports have climbed at least 4 percent in each month since a decline in January. The government increased public spending 9.7 percent in real terms in the first half of the year after a lag due to the presidential transition helped hold back the economy in 2013.

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