Economics: Continuing strength in US and Mexico activity with controlled inflation bode well for 2024 despite hawkish monetary policy

MEXICO - Report 19 Dec 2023 by Mauricio Gonzalez and Francisco González

The economic outlook for year-end 2023 and 2024 remains mixed. Continuing progress in international economic activity has been encouraging, with US GDP growth driven by personal consumption in goods and services, an expansion that has defied the Fed’s hawkish stance since the beginning of 2022, a stance that has failed to dampen the population's demand for goods and services. Considerable growth has been recorded in the Mexican economy, mainly thanks to the dynamism of the non-housing construction sector, and some services such as real estate and leisure services, whose accelerated growth marks a clear contrast with the continuing moderation of manufacturing. As for inflation, it has largely leveled off in recent months, with a very slight downward trend.

Public finances show a significant deterioration which, if not contained, could generate a problem during the transition to the next federal administration that will take office next October. In lieu of an ambitious budget package capable of raising its fiscal space, real-term growth in public debt will continue to outstrip government revenues or could lead to a lowering of the country’s sovereign investment grade.

This week we detail our economic outlook for the final quarter of 2023 and 2024 as well as for a more extended time horizon (2025-2030), while also covering a surprisingly robust yet strikingly uneven industrial activity report for October.

Now read on...

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