Economics: March economic data pointing south
During the third month of President Andrés Manuel López Obrador’s time in office the economic news remained mixed, but overall, disappointing and negative numbers predominated, including leading indicators. The coincident index and readings of consumption and investment all pointed to a slowing of activity. GFI accelerated its fall with its most negative report in six years, including the most pronounced reduction in machinery and equipment expenditure in almost a decade. And January industrial production fell year on year for a third consecutive month, with sharp setbacks in mining and utilities activity, even as manufacturing has enjoyed something of a rebound.
According to Mexico’s monthly GDP proxy, the Mexican economy grew a seasonally adjusted 1.2% in January compared to the same month a year earlier, far short of the average monthly growth rate of the previous year. Such indicators have prompted the OECD and others to lower their expectations of Mexican economic growth for this year and next, which we at GEA expect to expand by only 1.4% and 1.6% in 2019 and 2020, respectively.
Many international and domestic factors have contributed to this weakening of growth, including the erratic policy decisions and general lack of visibility emanating from the new government. That includes the approach it has taken on energy policy, especially on Pemex, which has led to ratings and outlook downgrades for the oil giant and other companies. Pemex continues its inexorable descent both operationally and financially, and there is special concern about the speed with which Pemex’s implosion has had a contagion effect on public finance in Mexico.
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