Economics: The economy continues to sputter along
Economic indicators published in January tended to point to an extension of the trend toward a moderate slowing of the Mexican economy. Trade performance actually improved significantly in December, much to the surprise of analysts as the country posted its first trade surplus of any month since March and the strongest for the year. Some of that improvement came in the form of a significant expansion of non petroleum exports (mainly manufactures, including a rebound in auto shipments abroad), but it was largely the result of a decline of domestic demand, with sharp reductions in both consumer and capital goods and a similarly stark softening of growth in intermediate goods.
More tellingly, Mexico’s GDP grew a preliminary 2.0% during 2018 and an annual 1.8% during the fourth quarter in the latest manifestation of a moderate slowing trend dating back to the second quarter of last year. Services continued to drive growth as plunging oil output continued to weigh heavily on industrial activity.
The labor market showed some signs of weakness as the base rate of unemployment extended its recent rebound through December to the highest reading in two years alongside gains in the rates of underemployment and informality.
Even some seriously lagging indicators produced negative results as private consumption experienced its least significant increase in October since March 2014, at the same time as gross fixed investment managed to sustain its average pace of growth for the first ten months of the year. And looking forward, the leading index for November slipped a sequential 0.13 points, its worst result since September 2011.
Moreover, considerable internal and external risk factors could affect economic, financial market and exchange rate performance over the next two years, the first of which involve Mexico’s monetary policy and ability to contain inflation, which has remained stubbornly high. The 12-month rate of consumer inflation ended December at 4.83%, but more recently, concluded the first half of January at 4.52%.
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