Consumption Remains the Star of GDP Growth, While the 2017 Electoral Panorama Tightens
The economic data released over the course of April offers encouraging signs of continuing growth in certain areas of the economy, but also potential harbingers of a slowdown that might emerge in future months.
The Global Index of Economic Activity (IGAE) for February showed the economy grew at a seasonally adjusted 12-month, real-term rate of growth of 2.2%. This sort of sluggish pace is now becoming something of a chronic condition as the monthly GDP proxy has only recorded acceptable levels of growth (better than 2.5%) in eleven out of the past 38 months (January 2014-February 2017), while falling short of that benchmark in the remaining 27 months.
Private consumption remained the Mexican economy’s main growth driver in early 2017, but we at GEA look for such spending to lose momentum as the year progresses, with job and wage growth slowing while inflation continues to climb, and monetary authorities likely contemplate further tightening moves.
And while there was good news in April regarding public finance, there is scant optimism regarding any progress in paying down public debt despite yet another major infusion of funds by the central bank.
In the political arena, a series of new corruption scandals and growing displeasure with problems of rising crime and deteriorating quality of life in general have suddenly thrown into doubt the governing PRI’s chances of holding onto three governor’s mansions that are in play next month. At this point it appears the PAN is headed for victory in Coahuila, where the PRI initially enjoyed a roughly 30 percentage point edge. A PAN-PRD coalition in Nayarit is also pulling far out front.
Even more crucial for the governing party is President Enrique Peña’s home state, where despite a highly fragmented opposition, the candidate of a powerful PRI machine suddenly appears to be slipping behind the Morena nominee, putting into jeopardy the control the PRI has enjoyed there for almost nine decades.
But much more important for the political future of the country is the extent to which the June 7 vote can decisively shape the outlook for the 2018 presidential race. A strong showing by the PAN in at least Coahuila and Nayarit would greatly strengthen PAN national chairman Ricardo Anaya’s odds of becoming his party’s presidential nominee and consolidate the momentum the party has enjoyed since a strong showing in the 2016 gubernatorial races put it on the inside track as the top contending party in 2018.
Should the Morena candidate in the State of Mexico sustain the slight lead she has enjoyed in recent polling, that relatively new party would inject considerable momentum into Andrés Manuel López Obrador’s third bid to become the next president of Mexico. A decent showing there by the PRD, along with a coalition victory in Nayarit could also help the PRD link up with a major alliance in 2018 that could give it a new lease on life.
And a trifecta of PRI losses would deprive that party of what is by far its most important bastion in terms of voters and resources and leave it seriously debilitated heading into the presidential contest.
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