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Increasing
optimism about prospects for Mexican economy …
Despite the
rather disappointing economic developments in January, the first quarter
outlook remains positive, since more recent indicators suggest an uptick
in the Mexican economy. The leading and coincident indicators for January,
published on 6 April, are both in positive territory. The coincident
indicator that tracks the current development of the economy, was up 0.28%
over the preceding month. Moreover, the leading indicator, which
tries to anticipate the trajectory of the Mexican economy, increased 0.87%
over the preceding month. The leading indicator profited from a very
positive development in the Mexican stock market, which reached a historic
maximum in early April, and a resilient oil price, which at the end of
March was 15.0% above last year’s level.
…
as external sectors shows strength and consumer confidence picks up
February
trade data also came in strong. Exports increased by 8.8% over
February 2003 and imports added 11.9% over the same period, bolstered by
higher purchases of raw materials and machinery used for manufacturing, a
sign that Mexican factories are planning to increase output. The
increase in exports reflects higher manufacturing exports (+10.3%
year-on-year) while oil exports dropped 2.7%. Finally, in March,
consumer confidence rose for the first time since August last year, as
households exhibit more optimism about their future economic state.
This optimism has translated into increased appetite for durable consumer
goods purchases.
The recent developments have fuelled hopes that the Mexican economy will
retrieve its ties with the U.S. economy and can finally pull clear from
past sluggishness. The Finance Ministry recently expressed that it
sees growth above 3.0% in the first quarter this year. The Consensus
shares this optimism and expects the economy to expand by 3.0% in the
first quarter, accelerating continuously to 3.7% in the final quarter
2004. Full year growth is seen at 3.2%, unchanged from last
month’s forecast. The gradual recovery should continue in 2005,
where the economy will expand by 3.4% according to this month’s
Consensus.
Inflation
drops in March
In March,
consumer prices increased 0.34%. The actual rate was almost exactly
in line with last month’s Consensus Forecast of 0.33%. Higher
prices for housing and transport constituted the main drivers for the
March price increase. The March reading ends a string of
above-average price developments, which had driven up annual headline
inflation to 4.5% in February, following on five months of stability where
inflation had remained at 4.0%. In March the rate dropped to 4.2%.
Core inflation, which excludes the erratic shifts in prices for oil and
fresh fruits and vegetables, dropped a notch to 3.5% in March. Thus,
while headline inflation remains at the upper limit of the Central
Bank’s one percentage point tolerance around a 3.0% central target rate
for this year, the core inflation rate is well within the established
limits. Nevertheless, the Central Bank expects inflation to decline
further throughout the year, as the relatively high unemployment offsets
the anticipated expansion in domestic demand. Consensus Forecast
panellists, however, still believe that year-end inflation will hover
close to the upper limit of the Central Bank’s target and have
maintained last month’s forecast unchanged at 4.0%. |
