Economics: Economy Defies External Winds
The main driver of growth in the Mexican economy during 2015 was to be found in the internal market, especially on the level of private consumption. Diverse indicators show that private consumption’s growth dynamic continues to be driven by the firming of the formal sector labor market as both the number of those employed and the remunerations they were paid continue to expand.
Another factor, in addition to formal sector payroll growth, is the continuing expansion of credit flows into consumer households, a development that reflects, in part, an increasing willingness by commercial banks to lend to those with jobs in the formal economy.
The catalysts of growth in private consumption continue to be sustained by precursors that have not weakened so far in 2016. More specifically, there are as yet no indications that the positive evolution of employment, real wages, household remittances and credit issued by commercial banks has abated. Although we can expect a deceleration due to the high comparison of the last year, private consumption will continue to act as the principal motor of growth in 2016, at a time of continuing uncertainty abroad.
In this week’s “Economic Outlook” section we analyze in further detail the private consumption catalysts that we are continuing to witness in the current year.
Last week officials also reported that aggregate supply and demand grew 2.4% year on year during the fourth quarter of 2015, the least pronounced expansion recorded last year.
Signs of weakness could be traced to the mere 0.6% rise recorded in gross fixed capital formation at the same time as exports widened 5.1%; both of those results were the least significant seen in the past six quarters.
Those sources of weakness were offset by consumption, which rose 3.3% for the quarter, led higher by a 3.5% rise in the segment of private consumption.
But Mexico’s central bank warned last week that while private consumption has sustained its elevated pace of expansion so far, some signs of a possible slowing of investment and exports have emerged in early 2016.
In the statement that accompanied Banco de México’s regularly scheduled monetary policy announcement, the monetary authority cautioned that there are some indications that we may soon see an unfavorable trend change in gross fixed investment at the same time as manufacturing exports remain stalled.
Banxico added that the economy’s rate of growth slowed in the most recent quarter compared to the third quarter of 2015 and announced that it was leaving its interbank reference rate unchanged at 3.75%.
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