Mexican Economy Remains Resilient

After an initial uncertainty shock triggered by the US election outcome sent investment and consumer sentiment to record-low levels in January, the Mexican economy’s fundamentals look stronger than anticipated.

The economy expanded a seasonally adjusted 0.6 percent on quarter in the first three months of 2017, following a 0.7 percent growth in the previous period, but beating market expectations of a flat reading. The growth was driven by a faster expansion in the services sector (1 percent vs 0.8 percent in Q4) and a rebound in agriculture (0.7 percent vs - 0.3 percent). However, industrial output was unchanged from the previous period, after growing slightly by 0.2 percent in Q4.

Recent trade data showed exports jumped 11.2 percent year-on-year in Q1. Manufacturing exports climbed 9.2 percent and oil exports surged 58.1 percent benefitting mainly by a favorable FX comparison in annual terms and by high double-digit growth in exports to countries other than the US.

The Markit Mexico Manufacturing PMI increased to 51.5 in March 2017 from 50.6 in February, reaching a five-month high. The print pointed to the strongest expansion in manufacturing activity since October of 2016, as new orders, output and stocks of inputs rose.

Also, consumer confidence has improved to 81.5 in March 2017, continuing to bounce back from January’s record-low of 69.9 backed by a stronger peso, the increase in the minimum wage in early 2017, and by the fading effects of gasoline price hikes.

Mexican Economy Remains Resilient,
4/28/2017 2:38:59 PM