Economics: There is good and bad in AMLO’s first 100 days
The first months of the government of President Andrés Manuel López Obrador have produced striking contrasts in economic matters, although clearly there have been more negative than positive ones. With its de facto impact on the economy dating back at least to late October, when he announced intentions to cancel the Texcoco airport and there was talk of the postponement/cancellation of the energy reform bid rounds, the most important question on our balance sheet of the administration’s handling of the economy during these first 100 days is still the direction of the economy at a time of heightened uncertainty domestically and globally.
The most significant developments on the promising side of the ledger include the extent to which consumer confidence continues to soar and consumer inflation continued to recede, breaking in February back within Banco de México’s 3% +/- 1pp target range for the first time since December 2016.
But the negative column is led by decreasing trends in production, consumption and investment indicators. We have seen a negative trend in industrial output dating back to October and reaffirmed in the latest report (January), and a drop in electricity production bodes ill for the broader economy. Private consumption showed its least pronounced growth in December, the National Retail Association reported another month of negative sales in February, and domestic sales of autos declined almost two percentage points during the first two months of the year.
Those negative output trends are already weighing on employment and household incomes. Growth has already been trending lower in payroll employment and real wages, even before the data begins to reflect the massive layoffs the government implemented since assuming power and that generally involved employees who had been enjoying mid range and high purchasing power. Gross Fixed Investment (GFI) continues to contract, as does business sentiment.
In the same way, ratings agencies unimpressed by government efforts to shore up Pemex have been lowering their outlook and ratings on Mexican debt, while analysts continue to scale back their GDP growth forecasts for this year and next. Those moves add to the squeeze on public finance as revenues fall and spending grows.
Now read on...
Register to sample a report