Month's Data Shows More Softening, whilst a potential PAN-AMLO race shapes up
Indicators published during September painted a less than encouraging picture of the direction of the Mexican economy beginning with industrial data for July that showed output increased at a mere 0.3% year on year, according to seasonally adjusted data. Though there was a slight firming of manufacturing output, oil and gas production continued to fall and infrastructure related construction activity was 17% weaker than the same month of 2015 as the government continues to scale back its physical investment budget.
There are signs of continuing strength in internal consumption, but both the authorities and business groups published evidence of a further softening of growth in private consumption.
Mexico’s trade balance accumulated a 10.86 billion dollar deficit during the first eight months of the year, a performance 16% worse than that of the same period of 2015, and in August goods exports fell a seasonally adjusted -2.6% below July levels with a -2.9% contraction in non petroleum exports a special point of concern.
This gradual loss of economic momentum is playing out at a time in which public finance is coming under mounting pressure and international debt ratings agencies have been lowering their Mexico outlooks. Business owners, market analysts and the authorities are all downwardly adjusting their expectations of economic performance and financial indicators.
In the monetary policy statement the Central Bank published last week while announcing it was cutting its benchmark interest rate by half a point, it noted that the Mexican economy softened further during the second quarter of this year due to a stalling of private consumption at the same time as both investment and external demand continued to turn in a weak performance. The monetary authority noted that the balance of inflation and economic growth risks has deteriorated and external factors could point toward a further devaluation of the peso. Factors that could stoke financial volatility and an even less favorable external environment include the US presidential elections, whose implications are especially important for Mexico this time around, uncertainty regarding a normalization of US monetary policy, and the possibility of a further weakening of oil prices.
The latest GEA-ISA poll revealed a significant shift in the electoral landscape ahead of the 2018 presidential contest. The negative image of the governing party (PRI) substantially worsened; 55% of respondents expressed an adverse opinion of the party and only 33% viewed it positively as the balance of opinions has shifted negatively by 39 points since President Enrique Peña Nieto took office.
While respondents increasingly associate the party’s main rival, the PAN, with positive political concepts such as democracy and wellbeing, they associate the PRI with the worst political vices such as election fraud and corrupt politicians. For the first time in at least the past four years, the PAN has nudged ahead of the PRI in voter support (23% to 22%).
Consistent with these perceptions, in the breakdown of electoral preferences by political parties for the 2018 presidential race (without taking into account possible candidates), support for the PRI has fallen significantly in the past two years.
Among prominent politicians known to harbor presidential ambitions, the only two that enjoy a positive balance of positive and negative opinions are two potential PAN nominees (party Chairman Ricardo Anaya at 24 points and Margarita Zavala with four). Their closest potential challengers, Morena’s Andrés Manuel López Obrador (AMLO) and Minister of the Interior Miguel Ángel Osorio Chong (PRI) scored negative balances of nine and ten points, respectively, as they are the two potential candidates with the most negative views.
When asked to pick someone from various hypothetical five-candidate fields, the PAN’s two most likely nominees (Anaya and Zavala), respondents gave them a roughly five point lead over their closest potential rivals (AMLO and Osorio Chong).
It is important to emphasize that these trends are provisional considering the high percentages of voters who say they are unfamiliar or totally unaware of most of the candidates, the fact that the election is more than 20 months away and that none of the potential contenders -with the exception of López Obrador- is the presumptive nominee of his or her party, and it is still unclear what alliances parties might build.
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