Economics: August indicators confirm significant deceleration, Pemex deterioration and risky monetary stance
Economic activity continued to slow in recent months as evidenced by a slight downward revision of second quarter GDP results, the onset of a weakening trend that could worsen should potential risks on both the external and internal fronts materialize.
The greatest threat domestically involves President López Obrador’s determination to pass most of his “Plan C” before he leaves office at the end of this month. His intention to totally replace the country’s judiciary has emerged as the point of greatest controversy so far, sparking alarm in the private sector and official criticisms from major capitals, including Washington and Ottawa, with broad implications for investment and trade relations adding to the uncertainty as a major review of the USMCA looms.
Meanwhile, a divided central bank opted for a risky quarter point interest rate cut even as monetary officials upwardly revised their inflation forecast for 2024 and 2025 while reiterating that a restrictive stance is warranted.
In the indicators of the recent week, the country’s trade deficit shrank 88% yoy in July to 72 million dollars almost entirely on the strength of non petroleum exports even as imports continued to grow, led by the consumer category. Intermediate goods imports extended their rebound of the previous month, after registering weak increases in the first five months of the year, in line with the performance of non-automotive manufacturing exports.
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