Economics: Business confidence in the Mexican economy weakens in recent months
Business confidence has been weakening in recent months. According to Inegi’s Monthly Survey of Business Opinion, as of September 2024 the overall business confidence indicator stood at 50.9 points (the maximum is 100), a level 5.5 points lower than in the same month of the previous year and which confirmed the pronounced downtrend that has been registered since mid-2023. Of the four major sectors that make up this indicator, construction is the one with the worst expectations, followed by non-financial services, commerce, and manufacturing.
Gross fixed capital formation is also displaying a clear slowdown. Although in July 2024 (latest available data) it posted a slight rebound with respect to June, increasing 3.9% at a seasonally adjusted annual rate, it has experienced a significant downturn compared to the first half of the year and, above all, with respect to 2023. Nor is there good news on the foreign investment front. As we have already reported, year to date most of it corresponds to reinvestment of profits and practically none (less than 5% of the total) to new investments.
In this context of slowing investment and falling business confidence, in her inauguration speeches, President Claudia Sheinbaum announced several general proposals aimed at encouraging private investment. These include security (rule of law), promotion of nearshoring, and agreements with businessmen, particularly through a council coordinated by Altagracia Gómez, her link to the business sector. On balance, the new administration's proposals seem reasonable; however, the risks associated with these “good intentions” are high. These include international developments, such as the outcome of the U.S. elections and internal risks, including the constitutional reforms that have sparked jitters in the business community and among Mexico’s North American trade partners.
With respect to the week's indicators, numbers published indicate that private consumption grew a seasonally adjusted annual 3.4%, a slight rebound with respect to the previous month's increase, but still below the average growth for the first half of the year.
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