What do the economic figures for the first quarter tell us?
Let me summarize it in five points.
1.- The Mexican economy is slowing down, despite the boost that the public sector has given to spending in recent months.
2.- The economic progress is uneven and in the first part of the year the impulse came mainly from the services sector, associated with the domestic market. The others fell.
3.- Despite episodes of volatility that have occurred occasionally, there is a stability condition, but with a rate of disinflation that will be slower than expected. Elections are not seen as a factor of instability.
4.- The federal government is spending more, as planned, both through greater transfers via social programs, as well as through greater public investment, but the deficit was even lower than programmed.
5.- The general forecast is that the stage of greatest dynamism will be in the first half of the year, so in the second part of 2024 maybe we will see one economic condition close to stagnation.
Let’s elaborate on these points.
The good news is that GDP has already accumulated 10 consecutive quarters of growth compared to the previous quarter, in what constitutes the longest growth phase (measured with quarterly variations) since the period 2010-2013, in which there was a period of 15 quarters of expansion.
The bad news is that the growth is weakening. The pace was 0.2 percent in the first quarter of the year and had been 0.1 in the last quarter of last year.
There are many contrasts according to the sectors of the economy.
Of the three sectors into which the INEGI divides the economy, there were two, agriculture and industry, in which there was a decline in the first quarter.
The positive rhythm of the economy derived mainly from the commerce and services sector, which is more directly associated with the internal market.
One of the factors that boosted the domestic market was public spending. A couple of days ago we saw the Public Finance Report in which it is stated that the programmable spending from the public sector grew by almost 25 percent in real terms in the first quarter of the year, which implies an additional disbursement of around 400 billion pesos in this period, compared to the same period in 2023.
But also consider wage increases, both average and minimum wage.
The real wage bill of the formal sector grew up in 7.5 percent annually as of March.
Despite the expansion of public spending, there have been no episodes of uncertainty that affect financial stability.
The exchange rate has fluctuated, mostly due to external events, but usually returns to low levels again. At yesterday’s close, the peso price was 17.04 per dollar, gaining ground after the Fed’s decision not to move interest rates.
And while inflation is taking longer to come down and rates are likely to stay high for longer, Nor have any speculative episodes been triggered.
He public deficit which, in its broadest meaning, that is, the financial requirements of the public sector, is estimated at 5.9 percent of GDP This year, the first quarter started even slightly below expectations.
However, there is consensus that 2024 will be split in two.
The first half will be reasonably good in economic matters, but the brake will be more visible in the second half of the year, in a condition rather close to stagnation, Well, public spending will probably slow down and we will have the situation of uncertainty that naturally arises when there is a change of government, which will slow down the growth of consumption and perhaps delay private sector investment.
In other words, what the first quarter data tells us is that the economy is not doing badly, but that probably for the year as a whole, the numbers are no longer so encouraging.
