Mexico Economic Update – April Twenty Twenty-Four

Hola, amigos! Let’s dive into the latest economic happenings down in Mexico. It’s a mixed bag of tacos, with some ingredients spicier than others.

Overview

So, the Mexican economy decided to wake up from its winter nap, clocking in a respectable growth of one point one percent in the first quarter of twenty twenty-four. The services sector, always a star performer, led the charge. This little growth spurt comes after a pretty ‘meh’ end to twenty twenty-three when the economy basically flatlined.

Now, the big brains forecasting the economic weather are still betting on a decent year, with GDP growth predicted to be around two point two percent for twenty twenty-four. But, and there’s always a ‘but,’ right? Recent data is about as clear as a shot of tequila after a night out in Cancun – a total mixed bag.

On the upside, we’ve got industrial production, exports, and employment all doing the Macarena. But hold your horses, because retail sales took a nosedive, and inflation? Well, let’s just say it’s hotter than a habanero pepper. Oh, and the peso? Steady as a rock against the dollar.

Key Economic Indicators

GDP

Alright, let’s break it down, shall we? The Mexican economy grew by a modest one point one percent in the first quarter of twenty twenty-four. While the services-providing sectors strutted their stuff with a zero point six percent growth, the goods-producing sectors decided to hit the snooze button, contracting by zero point five percent. But hey, let’s not forget the agricultural sector – those hardworking farmers and their crops expanded by a juicy one point seven percent!

Industrial Production

After a four-month siesta, industrial production finally decided to show up to the fiesta, edging up by zero point one percent in March. Manufacturing, the backbone of Mexican industry, saw a decent zero point five percent growth. But hold on, there’s a slight buzzkill – our amigos up north are experiencing a manufacturing slowdown, and that’s got Mexico feeling a little nervous.

Exports

Exports? Ah yes, those goods and services Mexico sends out to the world! They inched up, ever so slightly, by zero point one percent in April. Manufacturing exports, in particular, showed some gusto, rising by zero point six percent. However, oil exports took a bit of a tumble, plummeting by nine point three percent. Overall, exports for the year are down by one point one percent.

Retail Sales

Remember those retail sales we talked about? Yeah, well, they decided to play hooky in February, dropping by zero point four percent. Blame it on the shrinking remittances – those hard-earned dollars sent back home by Mexicans working abroad. And let’s not forget the party pooper called inflation, which is making everything more expensive than a weekend getaway to Tulum.

Employment

On a brighter note, the Mexican job market is looking hotter than a plate of chiles en nogada! Formal sector employment jumped by a whopping six point nine percent in April, adding a cool one hundred and twenty-three thousand jobs to the economy. That’s the biggest monthly increase since May twenty twenty-three, folks! Overall, total employment wrapped up twenty twenty-three with a solid one point eight percent increase. And guess what? The unemployment rate decided to chill out, staying put at a comfy two point seven percent in March.

Peso

Hold onto your sombreros, because the peso is as strong as a luchador! It’s been strutting its stuff against the US dollar, averaging sixteen point eight pesos per USD in April. That’s right, amigos, the same level as March! This impressive streak started late last year, thanks to Mexico’s solid macroeconomic moves, responsible spending habits (unlike your amigo after too many margaritas), and the buzz surrounding nearshoring – more on that later!

Remittances

Remember those remittances we were talking about? Sadly, they decided to join the siesta in March, dipping by two point three percent. It seems like our friends up north might be tightening their belts a tad, which means fewer dollars flowing back home.

Factors Influencing the Mexican Economy

Nearshoring: A Shot of Tequila for Growth?

Remember that buzz about “nearshoring” we mentioned earlier? Well, it’s more than just a buzzword – it’s a potential game-changer for the Mexican economy. Think of it like this: companies are realizing that setting up shop closer to home, instead of relying on far-flung supply chains, can save them a whole lot of pesos (and headaches!). And guess who’s strategically positioned to benefit? You got it – Mexico!

With its proximity to the US market, competitive labor costs, and a well-established manufacturing base, Mexico is becoming the go-to destination for companies looking to shorten their supply chains. From automotive giants to tech titans, everyone’s eyeing a piece of the Mexican pie. This influx of investment is like a shot of tequila for the economy, boosting everything from manufacturing to job creation. ¡Salud to that!

Inflation: The Uninvited Fiesta Guest

Now, let’s talk about the elephant in the room – inflation. It’s like that uninvited guest at a fiesta, the one who eats all the guacamole and refuses to do the Macarena. In April, inflation decided to crank up the heat, hitting a sizzling four point eight percent year-over-year. That’s hotter than March’s four point three percent reading, and it’s giving the central bank a serious case of the jitters.

The good news? Core inflation, which excludes those pesky volatile food and energy prices, decided to take a breather, slowing down to four point four percent. But hold your applause, because services inflation is still stubbornly high. Think of it like this: getting a haircut, fixing your car, or enjoying a night out is still putting a dent in your wallet.

Interest Rates: The Balancing Act

So, what are the bigwigs at the central bank doing about this whole inflation situation? They’re like tightrope walkers, trying to find the perfect balance. On one hand, they want to keep inflation in check, like a piñata at a children’s party. But on the other hand, they don’t want to slam the brakes on economic growth. It’s a delicate dance, amigos.

In May, the central bank decided to play it cool, keeping the benchmark interest rate unchanged at eleven percent. This came after a surprise twenty-five-basis-point cut in March, which had everyone speculating whether the rate-hiking cycle was finally over. But it seems like the central bankers are still a bit wary, preferring to wait and see how the inflation situation unfolds before making any drastic moves. Their goal? To tame inflation and bring it down to that magical three percent target. Let’s hope they pull it off!

Conclusion

So there you have it, amigos – the Mexican economy in a nutshell. It’s a mixed bag of challenges and opportunities, just like a plate of chiles en nogada – sweet, savory, and with a hint of spice. While the services sector is keeping the fiesta going, manufacturing is facing some headwinds, and inflation remains a persistent party pooper. However, with nearshoring opportunities on the horizon and a strong peso flexing its muscles, there’s reason for optimism. Stay tuned, amigos, because the Mexican economy is one exciting ride!