Mexico Economic Outlook
The economy expanded 0.5% quarter on quarter in Q4 according to a second data release, marginally above the flash estimate. Rebounds in the mining and construction sectors supported growth. However, manufacturing and retail trade slipped into contraction, and the business support services subsector continued its decline, potentially due to the ongoing impact of 2021’s labor outsourcing ban. Turning to 2023, activity likely continues to grow. Both the manufacturing and non-manufacturing PMIs were in expansionary territory in January–February. In January, car exports surged, while consumer confidence rose to an over one-year high and remittances increased by double digits, boding well for private spending. That said, Banxico’s ongoing aggressive tightening cycle—the Bank hiked by 50 basis points in February despite a softer hike from the Fed—will be containing momentum.
Inflation fell from 7.9% in January to 7.6% in February, but remained above the Central Bank’s 2.0–4.0% target range. Panelists see inflation declining steadily in the coming quarters on a tough base of comparison, restrictive monetary conditions and milder external price pressures, but staying above target throughout the year.