Mexico | The resilience of external demand drives manufacturing in 1Q23

Summary

The BBVA Manufacturing Multidimensional Indicator grew 4.1% in January (YoY), bringing the average year-on-year variation of the last three months to 3.5%, 1.2 pp below the quarterly average observed at the end of 2022

Key points

• Key points:
• The latest US retail sales figures suggest that private consumption still has ground to go, with gains in real wages and high levels of excess savings; in this context, we anticipate that the slowdown in the Mexican manufacturing sector will materialize more gradually than previously anticipated.
• Some segments, such as the manufacturing of machinery and equipment, and the automotive sector, are at production levels well above those observed in January 2022 (+16.0% and +9.5%, respectively), favored by external demand and nearshoring.
• Regarding the automotive industry (20% of manufacturing production), in December it registered a level of capacity utilization of 90.9%, the highest figure since the beginning of the series (January 2013), and 6.1% above its pre-pandemic level.
• Considering the improved outlook for external demand, as well as better than anticipated economic activity data for 2H22 and the resilience of private consumption, we have upward revised our 2023 growth estimate for Mexico from 0.6% to 1.4%.

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