Economics: 2Q aggregate demand results are mixed as risks of a 2023 slump increase
Aggregate supply and demand figures for the second quarter of 2022 showed growth in private consumption and investment that not only exceeded expectations, but also proved sufficient to possibly lead to slightly stronger average GDP growth for 2022 than we projected last month. But it is worth noting that the second quarter and July reports show a partial recovery in consumption largely based on a considerable expansion in consumption of imported goods, a trend favored by a strong and relatively stable peso. There is an additional impetus in the case of consumer food goods as the government’s anti-inflation policy includes zero tariffs on specific products that have led to a prioritization of imports.
Similarly, the rise in gross fixed investment has been significantly weighted toward imported capital goods while demand for domestically produced machinery and equipment and construction investment remain weak. And both investment in M&E of Mexican origin and construction remain considerably below 2018 levels. Given the risks of a deceleration of activity in Mexico next year in response to growing signs that the US economy could slow or enter a recession, we may see the incipient recovery in consumption stall and possibly see a widening of the gap separating current investment levels and those of 2018.
In economic news last week, consumer inflation accelerated considerably, rising an annual 8.70% in September, the country’s highest reading in 21 years and nine months, while the core rate also sustained its uptrend. Inflation is a significant factor in the continuing erosion of consumer sentiment as the consumer confidence index accelerated its fall in September.
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