Is there an imminent recession in Mexico?

Is there an imminent recession in Mexico?

Contrary to what some think, I think a recession in Mexico is not imminent.

It is true that central banks’ response to high inflation by raising interest rates more aggressively than expected may lead to a slowdown in demand.

However, the data available so far in our country indicates that it is not imminent that the lower growth rate will translate into a decrease in economic activity, at least during this year.

Mexico is clearly subject to what will happen in the United States.

In our neighbor to the north, despite growing fears of a recession, experts in most cases do not anticipate a deep economic meltdown or the brakes lasting for months.

The strength that consumption still has will generate resistance to a more severe recession.

It is likely that the savings that North American households have, resulting from fiscal and monetary stimulus in recent years, will allow them to withstand lower economic activity without having to reduce consumption significantly.

Although there is no financial support from the government in our country during the pandemic, and therefore families do not have a reserve of resources as in the United States, domestic consumption still resists.

Some recent indicators, such as the BBVA consumption watch for June, are showing 1 percent growth from the previous month after faltering in May.

Other data such as sales to comparable stores by ANTAD, which reported a nominal increase of 7.9 percent, reflect resistance to declining consumption.

If you combine a slight brake on exports with a continuing dynamic of consumption, then what you have is a panorama in which there is not a recession, but a slowdown in economic activity.

However, it is likely that indicators of productive investment will not improve significantly and that the movement of the economy will continue to be explained mainly by what happens to consumption and exports.

So we will have varying effects, depending on the sector of the economy or the region of the country.

In this way, it is possible, for example, that construction will continue to look like a brake while sectors associated with the production and distribution of consumer goods perform better, as may even with export sectors, although they will of course do so. It slows down if the US economy slows down.

For example, in the first five months of the year, industrial exports grew by 16.7 percent, which is complicated for the rest of the year.

But, even if his pace was cut in half, he would still perform very well.

For now, there is no recession in sight in Mexico.


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