Mexico‘s economy posted 3.1% y-o-y growth in 2022, driven by private consumption and manufacturing.
Going forward, BBVA forecasts that private consumption will continue to show resilience in 2023, while manufacturing will weaken in the face of lower external demand.
The manufacturing sector regained its pre-Covid-19 pandemic output level in 2H2022, driven by fading bottlenecks and supply reactivation, while private spending was boosted by income gains registered since 3Q2022.
On the one hand, private consumption grew 0.5% quarter-on-quarter (real) in the fourth quarter of last year, 0.2 percentage points (pp) above the previous quarter.
Continued growth in household spending benefited from rising real wages in 2H2022 and so far this year.
Private consumption
In particular, from June 2022 to February 2023, the average IMSS wage reported a cumulative change of 2.9% in real terms, while the total wage bill registered a cumulative change of 4.5% over the same period.
In addition to improvements in wages and formal employment, there was a gradual recovery in consumer credit (which is still 4% below its pre-COVID-19 level), and the positive performance of remittances.
U.S. market
On the industrial side, BBVA projects an eventual weakening of manufacturing production in the coming months, as the slower growth in demand for durable goods in the U.S. materializes.
The BBVA Multidimensional Manufacturing Indicator grew 2.0% in February (YoY), the lowest figure since late 2021, representing a turning point for manufacturing this year in the face of a gradual slowdown in external demand.
According to IGAE data, the automotive sector is already showing signs of weakening, recording a 1.7% MoM drop in production levels in January, while figures from the US Bureau of Economic Analysis show a 1.8% MoM (real) contraction in vehicle and auto parts sales during February.
In terms of capacity utilization, the transportation equipment segment (20% of Mexico’s manufacturing output) registered in January a level of 84.7%, the lowest since July 2022 (1.2 pp below its pre-pandemic level).
