Economics: 2021 GDP numbers project a weak 2022
Economic news this month confirmed the extent to which the economy is tending to stall. Friday’s GDP report for the fourth quarter proved to be only marginally more positive than the preliminary estimate Inegi issued at the beginning of the month, which had fallen almost three percentage points short of the market consensus. The latest data showed the tertiary sector eking out a 0.2% yoy uptick as opposed to the total flat result of the preliminary estimate, meaning that services were the sector contributing the most to keeping a lid on economic growth overall. The sharp declines experienced by a number segments reflect, in part, changes made to the Federal Labor Law affecting subcontracting or outsourcing, an impact that has extended to other industries. Meanwhile agricultural and industrial activity showed growth although the latter of these sectors continued to be affected by global supply chain bottlenecks.
Economic growth expectations for 2022 have dwindled from an original 3.4% to 2.1% according to Banxico´s survey of private analysts recent results. The latest indicators depict a labor market that as of December 2021 had failed to generate the necessary job and wage growth and point to obstacles to a continuing reactivation in the coming months. Although total employment ended this past year above the 2020 close, the rates of underemployment and the economically active population willing to work remain high.
After consumer inflation broke above 7% in January, with the core rate reaching highs not seen for over two decades, both readings sustained their climb in mid February. Moreover, the continuing uptrend in producer prices propelled the PPI above the CPI in the past two months, with such price growth especially pronounced in sectors key to the manufacture of intermediate inputs and capital goods such as metallic products, the chemicals industry or agricultural products and the food industry in general. The continuing strength of commodity prices, whether metals-related industrial inputs, grains or other agricultural products, impose additional production cost pressures on some sectors that are gearing back up in response to revived demand.
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