Mexico Economic Forecast

Mexico Economic Outlook

February 13, 2018

The economy grappled with the effects of high inflation, tighter monetary conditions and fiscal consolidation in the last quarter of 2017. A preliminary GDP estimate showed growth clocked in at 1.8% in Q4, only slightly above the 1.5% increase, a four-year low, recorded in Q3. Incoming economic data for the quarter suggests household consumption growth moderated from the previous quarter but remained resilient. Retail sales shrank at the sharpest pace in nearly four years in November, but solid labor conditions led the unemployment rate to dip to its lowest in over a decade in December. In addition, fixed investment data up to November suggests the government continued to scale down infrastructure projects in the fourth quarter, weighing on overall growth. Leading data for January is similarly discouraging, with consumer sentiment deteriorating and PMI indicators painting a mixed picture of the manufacturing sector.

Mexico Economic Growth

Upcoming general elections and lingering uncertainty surrounding NAFTA talks will continue weighing on the economy in H1. Growth should, however, gather momentum in H2 as political noise wanes, inflation eases and the peso firms, which would allow Banxico to turn more supportive of growth. The FocusEconomics panel expects growth of 2.2% in 2018, which is unchanged from last month’s estimate. For 2019, analysts see growth accelerating to 2.3%.

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Mexico Facts

Bond Yield7.73-0.24 %Feb 20
Exchange Rate18.71-0.29 %Feb 20
Stock Market48,6850.12 %Feb 20

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