Economics: More signs of decelerating manufacturing as public finances and monetary policy raise concerns

MEXICO - Report 25 Mar 2024 by Mauricio Gonzalez and Francisco González

Economic data published this past month continued to bear out our projection of a slowdown in early 2024. As predicted, manufacturing contracted anew in January, largely in response to slackened demand from US industry. In Mexico, drivers of economic activity remain primarily domestic as the extended surge in construction now is essentially the only source of industrial growth, and private consumption widened further thanks to the extent of job and wage growth but has been focused on imported goods.

New concerns emerged on the level of monetary policy. Even as the Fed and other major central banks cautiously suggested they may soon take initial steps to begin slowly unwinding the record string of interest rate hikes of recent years, Banxico jumped the gun last week with a quarter point cut, just before Inegi confirmed inflation has yet to be tamed as the CPI bounced back in the first half of March. And a dismal report from Pemex added to fears regarding the health of public finances.

In this week’s Outlook, we analyze the data from the past month as well as last week’s reports on the monthly GDP proxy for January and aggregate supply for the fourth quarter.

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