Mexican economy seems to have recorded sub-trend growth in October

Mexico is expected to have recorded a sub-trend growth in October as well. With the subdued industrial production of -1.4 percent year-on-year and trade numbers, the Mexican economy is expected to have recorded a significantly sub-trend growth rate of 1.5 percent in October, according to a Societe Generale research report.

The supply-side activity index has been expanding at a considerably better rate than industrial production as services have been underpinned by solid consumption growth for most of 2016. Given that inflation is starting to hit consumption growth, the industrial production outlook and the outlook for the overall economy would follow a further similar path in the future, stated Societe Generale.

Industrial output has stayed flat as the rate of mining contraction rose and the construction sector re-entered contraction. On the demand side, the slowdown in growth is driven by struggling investment growth. With the medium-term trade outlook declining after the U.S. election results, it is unlikely that growth in investment would be strong in the remainder of this cyclical expansion.

Furthermore, consumer confidence has deteriorated while purchasing power would also be impacted on the prospect of higher inflation on the back of a falling peso. Thus, although stronger fiscal spending in the U.S. might help resurrect the Mexican growth to certain extent, the medium-to longer-term outlook would deteriorate unless U.S. trade policy uncertainty wanes, added Societe Generale.