Economics: Data in recent weeks show internal demand leading strong growth, core prices fanning inflation and non-automotive manufacturing falling
January delivered further evidence that the Mexican economy performed better in 2023 than had been expected thanks in large part to a resurgence of the construction sector. This sector has benefitted from the combination of massive government outlays for its signature infrastructure projects and newfound dynamism in private investment in non-housing building, mainly in the form of expansions of installed capacity for manufacturing and complementary services, while residential construction continues to lag.
But the data also points to a number of new challenges, including a possible softening of consumer spending and a further weakening of the vast majority of manufacturing branches. New inflation pressures are emanating above all from agricultural and food items, especially fresh produce. And even as there are new signs of pressure on the labor market, AMLO is pushing ahead with his legislative initiative for long-term minimum wage hikes as well as a series of labor law reforms which, if implemented, would affect company costs and competitiveness. However, some reforms appear to be designed primarily set the agenda to attract voters this coming June as it is highly improbable that Congress will approve the whole package.
In our coverage of economic indicators for the week, the monthly GDP proxy showed that economic growth slowed slightly in November in a performance still powered by services and an industrial sector dominated by resurgent construction activity. Mexico achieved a strong trade surplus for December, the jobless rate fell and general inflation through the first half of January reached its highest level in more than six months.
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