Mexico: Economy to trek along at a 1.9 percent year-over-year pace this year – Wells Fargo

Analysts at Wells Fargo expect the Mexican economy to trek along at a  1.9 percent year-over-year pace this year before growing 2.4 percent in 2018.

Key Quotes

“The Mexican economy grew by a faster-than-expected 0.7 percent in Q1 from the prior quarter and expanded at a 2.4 percent year-over-year pace. Much of the growth occurred in the volatile primary sector (agriculture), which rose by a solid 8.9 percent year over year in Q1. The secondary sector has had more muted growth as declines in oil, mining and construction outweighed modest gains in manufacturing.”

“Consumer prices starting to gain momentum in late 2016 and accelerated early this year as peso depreciation whittled consumers’ purchasing power. Indeed, consumption has softened due to rising inflation. That said, the Bank of Mexico believes that inflation, which is currently running at 6.2 percent year over year, will start to diminish this year and move toward the  3.0 percent target in 2018.”

“During his campaign and the start of his term, President Trump threatened to pursue U.S. policies that could hurt the Mexican economy, which sent the peso diving. However, thus far, the softer approach to NAFTA renegotiations has eased nerves for now and the central bank has upwardly revised its 2017 growth estimates to 1.5 percent – 2.5 percent from its previous estimate of 1.3 percent – 2.3 percent.”