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Mexico GDP (Q1 Prov.)

The pick-up in Mexico’s GDP growth to 0.9% q/q last quarter was largely a result of a strong carryover from late 2021, and the economy was weakening sharply heading into Q2. As the headwinds from high inflation and weak US growth mount, we think that Mexico’s recovery will stay sluggish from here.
Nikhil Sanghani Emerging Markets Economist
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Latin America Chart Book

High inflation fuels strikes and protests

High inflation seems to be causing growing unrest in the region, which threatens to be economically disruptive and raise fiscal concerns. Recent protests in Ecuador have hit its oil sector hard, while truck drivers in Peru are about to embark on a strike. Elsewhere, Brazil’s government is seeking to stave off possible unrest among truck drivers with higher benefits, while Mexico’s last month sought to freeze the prices of some basic goods. It remains to be seen what impact all this will have. But the regions’ recent experience suggests that strikes and protests can hit output significantly. And higher public spending to cushion the blow to consumers and businesses will cause weigh on budget positions. EM Drop-In (Thurs, 7th July): Join our economists for their regular monthly briefing on the hot stories in EMs – and those that aren’t getting the attention they deserve. In this 20-minute session, topics will include the outlook for EM FX markets after the recent sell-offs. Register now.

28 June 2022

Latin America Economics Weekly

Petro reaction, Lula’s plans, hawkish central banks

Gustavo Petro’s win in Colombia’s presidential election has caused tremors in the country’s financial markets. While the appointment of a centrist finance minister could help to settle investors’ nerves, the global backdrop is turning increasingly unfavourable. In Brazil, Lula, the front-runner in the race for the presidency, unveiled policy plans that will, likewise, probably unnerve investors around the election there in October. Finally, the week was marked by further hawkish noises from central banks in the region. We’ve revised up our interest rate profile in Brazil and the upside risks to our interest rate forecast in Mexico are growing.

24 June 2022

Latin America Economics Update

Banxico’s tightening cycle shifts up a gear

The Mexican central bank’s shift to a 75bp interest rate hike yesterday (to 7.75%) and the hawkish language in the accompanying statement make another 75bp move at the next meeting in August a done deal. And the risks to our end-2022 interest rate forecast of 9.50%, which is already higher than most expect, are now skewed to the upside.

24 June 2022

More from Nikhil Sanghani

Latin America Data Response

Mexico Bi-Weekly CPI (Apr.)

The rise in Mexico’s inflation to 7.7% y/y in the first two weeks of April was driven by a broad based strengthening of price pressures, which will be a concern for the central bank. This, alongside the increasingly hawkish US Fed, may push Banxico towards a larger 75bp rate hike at its meeting next month.

22 April 2022

Latin America Economics Weekly

Boric on the backfoot, Argentine inflation concerns

The political fight over a fresh round of pension withdrawals in Chile underlines the Boric administration's struggle to wean the economy off accommodative policies. This will heap more pressure on the central bank to tighten policy aggressively to alleviate inflation and balance of payments risks. Otherwise, strong inflation data out of Argentina this week suggest that the government will fail to meet the IMF's target to reduce inflation this year. There's a risk this will be a prelude to broader slippage on the terms of its new deal with the Fund.
We are sending this Weekly one day earlier than usual because our offices are closed for Good Friday on Friday, 15th April.

14 April 2022

Latin America Data Response

Mexico Industrial Production (Feb.)

The disappointing 1.0% m/m fall in Mexico’s industrial production in February was partly because a temporary boost to mining output at the start of the year reversed course. But there were broader signs of weakness in industry too. The outlook for the sector remains challenging given the renewed threat to global supply chains from the war in Ukraine and recent lockdowns in China.

11 April 2022
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