Mexican economy likely to boost manufacturing production in 2016

Mexico is an oil producing and exporting nation and this is the reason most economists blamed the falling crude oil prices for the Peso depreciation and currency imbalance. In May of 2014, a short 20 months ago the Peso was 12.84 per Dollar and today USD-MXN is close to 18.45. 

In other way Peso depreciation is boosting Mexico's manufacturing production by increasing exports competitiveness. But the currency depreciation also affects manufacturing activity with a considerable interval. 

To calculate such significant production gap, J P Morgan undertook two different scenarios. 

To control US manufacturing growth and domestic private consumption, a 10%oya depreciation of the currency against the dollar should translates into a 0.7%-pt boost to annual growth in manufacturing output a year and a half later. Given that, on average, the peso depreciated nearly 11%oya against the dollar between mid- 2014 and mid-2015, the thrust to manufacturing growth from a weaker currency could be close to 0.8%-pt this year.

If we calculate the production gap with NEER (Nominal Effective Exchange Rate), the result is matching with the above one. However, the degree of depreciation of the NEER was just over half the depreciation of the peso against just the dollar in the relevant period, which gives hint on manufacturing production growth for year ahead.J P Morgan forecasts Mexican manufacturing production likely to expand by 3.3%oya in 2016.