Positive Indicators: the Mexican economy continues its sustained growth

Inspenet, June 5, 2023

The Mexican economy continued in an expansion phase last April, with weaknesses in interest rates and manufacturing.

The Leading Indicator, whose objective is to anticipate economic cycles, managed to locate itself in an acceleration stage, since during the fourth month of 2023 it obtained 100.10 points, placing it for the second consecutive time above its long-term trend (100 points).

In addition, it registered six consecutive months of growth and it is worth noting that four of its six components were positive factors for the country’s economic activity.

Key Components: Analyzing the factors that drive and challenge the Mexican economy

The components were real exchange rate, Price Index and Mexican Stock Market Quotations in real terms Standard & Poor’s 500 Index and business confidence indicator: the right time to invest.

The first fell 0.25 points, but its behavior is contrary to that of economic activity; in April it ran some 14 months with falls, showing the strength of the national currency against the dollar.

Meanwhile, the second component increased 0.12 points for its seventh consecutive rise, while the third grew 0.06 points, giving its fourth rise.

The Business Confidence Indicator: Right time to invest grew 0.03 points in the fifth month with an increase.

Obstacles and Strategies: How the interest rate and manufacturing impact the Mexican economy

The obstacles to the Mexican economy are the monetary policy rate and manufacturing, according to the Cyclic Indicator System of the National Institute of Statistics and Geography (INEGI) .

The sub-index of the equilibrium interbank interest rate (TIIE) increased 0.07 points, showing two consecutive years with increases, but it is interpreted as the exchange rate.

One of the Banco de México’s strategies to control the high inflationary levels, discouraging consumption by increasing the financial cost, was to increase the interest rate.

Although in the last decision the central bank decided to maintain the objective, the monetary policy rate is high (11.25%).

At the end of the year, there is an expectation of annual inflation of 5.0%, however, it is still a high level and is outside the target range of 2-4% of the Bank of Mexico, so Banxico would cut the rate until the second half of 2024.

Source : NewsEsEuro

Photos : Shutter Stock

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