Economics: October indicators show internal demand components remain strong, while non petroleum exports decelerate
As we await this week’s preliminary report on third quarter GDP, economic news from the past month has painted a picture of an economy that continues to expand largely thanks to growth in fixed asset investments and private consumption. But continuing strength in industrial output has become increasingly dependent on a resurgence of heavy construction activity while the deceleration of manufacturing delivered the sector’s first outright contraction in roughly two years, with all companies except the automotive sector experiencing falling export demand, and even automotives seeing deceleration.
Inflation continued to recede through the first half of October, with the headline consumer rate proving not only softer than expected but also the lowest reading in 31 months. But such evidence of further cooling should not prompt premature celebrations, a concern shared by central bank officials who are likely to extend their seven-month interest rate pause at least until next February’s Federal Reserve rate review.
The month also produced a belated federal government initiative to try and further cash in on the nearshoring phenomenon through tax breaks aimed at luring more foreign direct investment among manufacturers of batteries, engines, medical instruments, and everything from pharmaceuticals to fertilizers, as well as agribusiness. But the initiative fails to address key obstacles in areas such as transportation infrastructure, access to clean energy and problems in compliance with the rule of law.
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