UPDATE 1-Mexican consumer boom wanes as downturn bites

(Adds December retail sales data)

By Robert Campbell

MEXICO CITY, Feb 23 (Reuters) - After years of easy spending fueled by cheap loans and economic stability, Mexican consumers are being careful with their pesos through fear the economic crisis will eat away at hard-earned gains of recent years.

Consumer spending soared in Mexico as the country reaped the rewards of free trade with the United States from the mid-1990s and the central bank kept inflation low.

The boom turned Wal-Mart's local unit (WMT.N) (WALMEXV.MX) into the nation's biggest private employer as supermarkets sprung up even in remote towns and the financial crises of the past appeared to have been left behind.

But with the United States mired in a deep recession and Mexico's export-dependent industries slashing jobs to cope with the sudden drop in demand, consumer confidence in Mexico is sliding and threatens to push the country further into recession.

"Everyone I know is cutting back on big purchases and trying to save money. I wanted a new flat screen television but I think I'm going to wait," said Enrique Vargas, a Mexico City office worker.

The spreading worry sent Mexico's consumer confidence index MXCONC=ECI to a record low in January. Retail sales plunged for the fourth consecutive month in December, dropping 3.3 percent compared with a year ago, according to government data released on Monday.

The slump is forcing stores all over the country to slash prices to attract customers, even in the capital's swanky Polanco district, home to luxury jewelers and designer boutiques.