Economics: Economic data in April generally came in stronger than expected, but manufacturing keeps decelerating
Economic activity in Mexico began the year with a stronger rebound than we expected in late 2022, beginning with data for January that showed private consumption had risen an annual 5.9% at the same time as Gross Fixed Capital Formation jumped 7.1%. The services sector (6.5%) was also a major driver during the first month of the year, a role it continued to play throughout the first quarter.
In contrast, there has been a weakening of some branches of manufacturing in response to softening demand for non petroleum exports at the same time as an increasingly strong peso relative to the dollar has stoked demand for both capital and consumer goods imports and depressed demand for those produced domestically. This development could have negative implications for GDP growth over the medium term.
Another factor that is likely to continue to exert downward pressure not only on the country’s trade performance but also its manufacturing sector is the extent to which the US economy slows, especially its industrial activity, as further evidenced by that country’s surprisingly weak 1Q23 GDP results. In contrast to those disappointing figures, just this past week we got Inegi’s preliminary estimates of first quarter GDP, which showed a 3.9% annual increase in economic activity on the strength of an impressive 4.4% expansion of tertiary sector activity.
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