Economics: The Puzzle of Conflicting Indicators
The contrast between the weak behavior of Mexico’s GDP in the first six months of 2015 and various other economic indicators prompted the head of Mexico’s Tax Authority (SAT), Aristóteles Núñez, and some analysts to begin arguing in October that there was a probability that the methodology the authorities currently employ to gauge GDP leads to an underestimation of the real trajectory of the economy.
At first glance it would appear that the behavior of diverse economic indicators, such as internal consumption, tax collections, employment, and GDP calculated using demand components without taking into account the statistical discrepancy, contrasts with variations recorded in GDP when calculated using the value of output. Moreover, the output method of calculating GDP maintains a greater degree of precision over the short term while the differences tend to dissipate over the long term
However, by using the historical data published by the National Statistics Office (Inegi) as an input for calculating adjustments in Gross Domestic Product, we at GEA conclude that the output method of calculating GDP continues to offer a greater degree of precision over the short term while the differences between the results of both approaches tend to dissipate over the course of successive revisions of the data.
In this week’s issue we analyze the aggregate supply and demand data that was published last week, and look at the differences seen in the rate of growth of GDP calculated based on aggregate demand and that of the net product approach to calculating GDP.
In other news, last week authorities announced the results of the Round One, Third Tender, in which Mexico successfully auctioned all 25 blocks of fields on offer. Seventeen are intended for the exploration and production of crude oil and eight for extracting natural gas. The fields are located in the states of Chiapas, Nuevo León, Tabasco, Tamaulipas and Veracruz.
Among the winning companies, 18 are based in Mexico, two were from the United States, and there was one each from the Netherlands and Canada. The awarded contracts will require approximately 1.1 billion dollars of investment over the next 25 years.
Meanwhile, Mexico’s central bank followed Wednesday’ s Federal Reserve lift-off with a rate hike of its own on Thursday, its first since 2008.Banco de Mexico’s increased the overnight interbank rate (TIIE) a quarter of a point to 3.25%. In its statement accompanying the rate decision, the bank argued that a failure to act following the Fed’s rate decision might spark a disorderly selloff of the peso, which in turn could fan inflation expectations and rates. But the bank also suggested it was in no hurry to get ahead of the Fed’s rate decisions as it added that it intends to remain in a position to “take additional actions with all flexibility and in the moment that conditions require them”. The Fed set a new target range for its federal funds rate of 0.25% to 0.5%, up from 0.0% to 0.25%.
Now read on...
Register to sample a report