Economics: Another month of negative data
The economic news released in January offered further evidence of a listless economy and the prospect of further weakness to come in what have been the main growth drivers. There were continuing signs of a softening domestic economy as vehicle sales accelerated their fall in December in tandem with the steady erosion of consumer sentiment that has played out during the second half of the year, with households increasingly pessimistic about their personal economic prospects and those of the Mexican economy going forward. As a result, private expenditures slowed considerably (from 2.4% a year earlier to 1.0% through the first ten months of 2019), with that reduced pace sustained almost exclusively by a second consecutive monthly bounce in consumption of imports, with trends suggesting we can expect spending reports for the balance of the year to show a further loss of momentum.
The economy will also have to navigate the crosswinds implied by public policy decisions that have helped to slow the pace of both foreign and domestic investing even as other factors such as the National Infrastructure Accord with the private sector and the USMCA ratification could help reactivate certain economic components in the coming year.
Gross fixed investment accelerated its fall during October for a ninth consecutive month of increasingly negative results, with setbacks in all index components, including an especially sharp drop in expenditures related to imported transportation equipment, and high single-digit declines in non housing related construction, imported M&E and transportation equipment of domestic origin.
Another weak IGAE (GDP proxy) for November (-0.8% yoy) came under the weight of continuing losses in industrial activity (both manufacturing and construction), and particularly pronounced declines in wholesale commerce, and both healthcare and educational services. We calculate that economic activity contracted 0.3% on average during the fourth quarter of 2019, an estimate that was borne out just this Friday with Inegi’s preliminary GDP report for the fourth quarter showing that economic activity decreased 0.3% compared to the same quarter of 2018. That was the third outright contraction in as many quarters, and one that suggests the economy also slipped 0.1% during full-year 2019, exactly as we at GEA had projected.
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