Itaú BBA - MEXICO – GFI remained weak, while private consumption grew at a below trend pace in the quarter ende

Macro Latam

< Back

MEXICO – GFI remained weak, while private consumption grew at a below trend pace in the quarter ende

April 8, 2019

We expect economic activity to slow to 1.4% in 2019 (from 2018: 2.0%)

Gross fixed investment (GFI) surprised to the upside in January, but remained weak in the quarter ended in January. The monthly GFI increased to 1.6% year-over-year in January, above our forecast of -1.3% and market expectations (-2.0%, as per Bloomberg). According to calendar adjusted figures, GFI increased at a similar rate (1.5% year-over-year, from -6.4% in December), taking the three month moving average growth rate to -2.7% year-over-year in the quarter ended in January (from -2.5% in December). Looking at the breakdown, also with calendar adjusted figures, construction investment decreased 1.6% in the quarter ended in January (from -2.6% in December), with residential construction improving, while non-residential construction kept contracting. In turn, Machinery & Equip ment (M&E) investment deteriorated to -4.4% in the quarter ended in January (from -2.9% in December).

At the margin, GFI also remained weak in the quarter ended in January.  With seasonally adjusted figures, the quarter-over-quarter annualized rate (qoq/saar) stood at -4.9% in the quarter ended in January (from -10.9% in December). Within GFI, construction improved to 6.2% qoq/saar in the quarter ended in January (from -2.6% in December), while Machinery & Equipment kept contracting (-15.9%, from -20.4%).

On another note, private consumption expanded at a below trend pace in the quarter ended in January. The monthly proxy for private consumption increased to 2.3% year-over-year in January (from 0.4% in December), taking the three month-moving average to 1.7% in the quarter ended in January (from 1.1% in December). Although retail sales accelerated in the quarter ended in January (compared to last month), it grew at a below trend pace. Using calendar-adjusted data reported by the Nation Statistics Institute (INEGI), private consumption grew at a similar rate, taking the 3MMA growth rate to 1.7% in the quarter ended in January (from 1.4% in December).

At the margin, private consumption accelerated, but remained soft in the quarter ended in January. Using seasonally-adjusted figures, private consumption increased 0.3% month-over-month in January (from 0% in December), taking the quarter-over-quarter annualized growth rate to 1.1% in the quarter ended in January (from -1.5% in December).

We expect economic activity to slow to 1.4% in 2019 (from 2018: 2.0%). Uncertainty over domestic policy direction and remaining uncertainties over the approval of NAFTA by the U.S. Congress will continue to weight on investment. Deceleration in the U.S. economy will also curb growth. In this context, employment is weakening. However, recent real wage increases are a buffer for activity. Lower inflation and minimum wage increases, amid a still-tight output gap are the factors boosting real wages.


Julio Ruiz



< Back