Economics: Results in May point to risks of further deceleration
Economic indicators published in May once again showed increased activity, although with markedly uneven results depending on the sector or branch in question. Manufacturing, the only GDP component to boast a significant recovery so far, recorded the strongest expansion of any industrial component for the quarter. However, it is precisely factory output where we foresee the potential for problems in the coming months as the factors that led to a weakening in March may be increasingly apparent in the near future as demand for Mexican manufactured exports will inevitably weaken given the extent to which US economic growth forecasts are being scaled back.
Public finance showed relatively favorable first quarter results from some revenue and spending components, along with a pronounced reduction of the public deficit and an expansion of the primary surplus. However, the results reaffirmed a deficient evolution in the structure of spending, especially in the case of physical investment, as well as mounting pressures on non programmable spending under the weight of rising debt-servicing costs.
With inflation extending its climb, monetary authorities sustained their tightening moves while the federal government, in conjunction with the private sector, announced an Anti-inflation and Cost of Living Package (Pacic), the primary purpose of which is to contain price rises in the case of basic consumer basket items. We consider that, given its characteristics, the package will have a very limited effect on inflation in the short run.
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