Mexico Surprises With Above-Forecast Growth on Export Surge
Comment of the Day

April 28 2023

Commentary by Eoin Treacy

Mexico Surprises With Above-Forecast Growth on Export Surge

This article from Bloomberg may be of interest to subscribers. Here is a section: 

“This is a solid report, showing a resilient economy on the back of supportive remittances, rising exports, and improving labor conditions,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “We expect economic activity to be more resilient than in previous cycles.”

The economy’s accelerating growth gives some pause to economists who’ve predicted that the country is headed for a contraction later in the year, due to the expected downturn in the US, Mexico’s biggest trading partner. Part of the surprise is the boost from the domestic market, which has contributed especially to the revival of the services sector, after it plunged earlier during the pandemic.

The Mexican peso erased earlier losses and strengthened as much as 0.3% after the first quarter release.

Eoin Treacy's view

Mexico is likely to be one of the primary beneficiaries of the reorientation of supply chains as geopolitical tensions between the OECD and China intensify. The prospect of exporting LNG to Europe and the potential for domestic lithium to be used for battery manufacturing and exports is a key reason for optimism about the potential for economic growth.
The Mexican Peso is testing the 2017 highs and continues to hold a sequence of higher reaction lows.

The iShares Mexico ETF is testing the upper side of a first step above the base. 

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