Overview of Mexico’s Economic Situation
Mexico’s economy is experiencing sluggish growth, with the previous quarter showing a decline that casts doubt on whether the Gross Domestic Product (GDP) can expand by at least half a percentage point this year.
Primary Sector Performance
The primary sector, which includes agroindustrial activities, has displayed remarkable expansion figures over the past few quarters. However, its low contribution to the overall economy means it cannot single-handedly lift Mexico’s economic performance.
Secondary and Tertiary Sectors
The secondary sector, dominated by industry, is clearly in a recessionary phase. Meanwhile, tertiary sector activities have been the primary drivers keeping Mexico’s economy afloat.
Consumer Spending Analysis
Two key data points from the National Institute of Statistics and Geography (Inegi) provide insight into Mexico’s economic activity. These are private consumption and fixed capital investment, which confirm the negative trends.
Private Consumption
August’s data, though part of the initial PIB reading for Q3 (which showed a yearly decline of -0.3% and a 0.9% expansion in tertiary sector activities), offers more revealing details.
Domestic consumption of goods remains stagnant, with annual growth at zero. The expansion in domestic consumption was facilitated by the robust growth of service indices, which expanded by 0.8%.
What truly enabled the recovery of domestic consumption in August compared to July was the import goods category, which saw a substantial annual expansion of 4.4%.
When comparing August 2022 to the same month last year, domestic goods consumption expansion stands at a mere 2.09%, indicating stagnation, while imported goods saw a significant growth of 43.77%.
Beneficiaries and Implications
Intuitively, it’s clear who benefits from domestic consumption. Evidence includes the trade balance with China and increased U.S. consumer goods imports, balanced by sustained Mexican exports.
Additionally, the analysis should consider the strong currency and increased consumer credit, with personal credit growth at 9%, projecting future trends.
Lastly, the capital formation index’s annual decline of -8.9% through August (a substantial figure for a country heavily reliant on foreign trade) should not be overlooked.
Investment and Employment
Lower confidence, contracting public investment, and reduced job creation are all reflected in these figures. These factors paint a clearer picture of Mexico’s economic future.
