Economics: Bits of promising news amid a complicated outlook
Data released in May provided plenty of evidence of continuing economic weakness in Mexico, but also glimmers of what could be more positive developments to come, as reported numbers of Covid-19 cases continued to trend lower and pandemic-related restrictions continued to be phased out through much of the country. Although private expenditure extended its fall in February, retail sales snapped a 13-month streak of contractions in March at the same time as wholesale activity accelerated its incipient growth trend following more than two years in the red. The easing of pandemic-related restrictions and strong external demand seem to be playing their part in an incipient recovery of industrial activity; although these are also lagging indicators, manufacturing was uniquely responsible for March’s expansion of industrial output as factories in key branches continued to hire and step up production.
However, an unfavorable monthly GDP proxy for March reflected the extent to which some branches of tertiary activity remain below year earlier levels, and at the same time the revised GDP report for the first quarter also showed activity continuing to contract. Clearly, recovery prospects clearly face significant hurdles, beginning with the extent to which Pemex yet again significantly failed to live up to its targets through the first quarter as the company’s debt continues to grow, thereby adding pressure to public finance and jeopardizing the country’s investment grade status.
Monetary policy also faces new challenges, with April’s consumer inflation report delivering the highest yoy reading in 40 months amid mounting pressure from both core and non core components, and President López Obrador's announcing his intention to propose a new central bank head for the next six years who is more dedicated to AMLO’s idea of a "moral economy".
This week we are updating our 2021 risk map.
Now read on...
Register to sample a report