![Page 1: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/1.jpg)
Quarterly Report
May 29, 2019January – March 2019
![Page 2: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/2.jpg)
1
2
3
4
Outline
5
Inflation
Monetary policy
Current situation of the Mexican economy
External conditions
Quarterly Report January - March 2019 1
Forecasts and final remarks
![Page 3: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/3.jpg)
-12
-8
-4
0
4
8
12
2001
2004
2007
2010
2013
2016
2019
-1
0
1
2
3
4
5
6
2015
2016
2017
2018
2019
2
Source: CPB Netherlands and Markit.
Quarterly Report January - March 2019
World GDP Growth 1/
Quarterly Annualized % change, s. a.
s. a. / Seasonally adjusted figures.1/ The sample of countries used in the calculations accounts for85.5% of world GDP measured by purchasing power parity.Source: Prepared by Banco de México with data from HaverAnalytics, J.P. Morgan and International Monetary Fund (IMF).
Global Activity Indicators Annual % change of 3-month moving average and
deviation from the threshold of 50
Global economic activity exhibited a modest recovery in Q1 2019, after having decelerated during the secondhalf of 2018. Such moderate pace of growth has been associated mostly with the worsening of businessinvestment, industrial production and trade.
Global Consumer and Business ConfidenceStandard deviations of the average of
2010 to date
Source: J.P. Morgan.
2014
2015
2016
2017
2018
2019
-1.2
-0.8
-0.4
0.0
0.4
0.8
1.2
1.6
2.0March
Consumer confidence
Business confidence
World trade
PMI: new orders
Industrial production
April
World Economy
World
Advanced
Emerging
MarchQ1 2019
![Page 4: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/4.jpg)
-2
-1
0
1
2
3
4
2012
2013
2014
2015
2016
2017
2018
2019
-3
-2
-1
0
1
2
3
4
5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
3
Labor markets in advanced economies continued to exhibit strength and some wage growth.
Unemployment GapPercentage points
Nominal Wages Annual % change, s. a.
Source: Prepared by Banco de México with data from CBO, OECD, Economic Outlook, May2019 and National Statistical Agencies.
s. a. / Seasonally adjusted figures. Note: Wage indicators of U.S., euro area, U.K. and Japancorrespond to average hourly remunerations, compensation per employee, weekly averageremunerations and average monetary remunerations, respectively. Source: BLS, BCE, Bloombergand ONS.
Quarterly Report January - March 2019
United States
Euro area
United Kingdom
Japan
March
Advanced Economies
United States
Euro areaUnited Kingdom
Japan
AprilAprilMarch
![Page 5: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/5.jpg)
0
20
40
60
80
100
120
2014
2015
2016
2017
2018
2019
4
International commodity prices trended upwards during Q1 2019. In particular, crude oil prices registeredsignificant hikes during the first months of the year. Nevertheless, the recent escalation of trade tensionscontributed, to a slight downward adjustment in crude oil prices.
Commodity Prices Index 2014 = 100
International Crude Oil PricesUS dollars per barrel
Source: International Monetary Fund. Source: Bloomberg.
Quarterly Report January - March 2019
Brent
WTI
Mexican crude oil mix
May0
20
40
60
80
100
120
140
160
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
April
Total
Energy
Metals
Food
![Page 6: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/6.jpg)
-2
-1
0
1
2
3
4
2013
2014
2015
2016
2017
2018
2019
-2
-1
0
1
2
3
4
2013
2014
2015
2016
2017
2018
2019
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
Median 2.0Median 2.1
Median 1.9
Quarterly Report January - March 2019 5
In the major advanced economies, headline inflation increased slightly due to the increase in energy prices.Likewise, core inflation as well as inflation expectations drawn from market instruments remained low and, inseveral cases, decreased, thus suggesting that inflationary pressures remain contained.
Headline InflationAnnual % change
Core InflationAnnual % change
1/ Refers to the Personal Consumption Expenditure Price Index(PCE). Source: Haver Analytics, BEA, Eurostat and StatisticsBureau.
2/ Refers to the Personal Consumption Expenditure Price Index thatexcludes food and energy (PCE). 3/For Japan excludes energy and freshfood and the direct effect of the consumption tax increase. Source:Haver Analytics.
Euro area
United Kingdom
Japan
United States 1/
Euro area
United Kingdom
Japan 3/
United States 2/
Advanced Economies Inflation Forecasts for 2019%
4/ Refers to the expectation for the Consumer Price Index (CPI).Source: Consensus Forecast. The last survey was conducted in May, 2019.
United States 4/
Canada
United Kingdom
Euro area
Japan
May 2019 ForecastMarch 2019 Forecast
December 2018 ForecastObserved 2018
April April
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
-0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
Median 1.4
Median 1.7Median 1.3
Median 1.9Median 1.8Median 2.1
Median 1.9
Median 2.0Median 1.7
Median 0.6Median 0.6Median 1.0
March March
![Page 7: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/7.jpg)
6
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2014
2015
2016
2017
2018
2019
2020
Reference Rates and Implied Trajectoriesin OIS Curves 1/
%
Prospective Distribution of the Reference Rate atthe End of 2019 Implied in Options 3/
Density
1/ OIS: Fixed-for-floating swap where the fixed interest rate is the one day effective reference rate. 2/ Data for the observed federal funds rate corresponds to the average between the lower and upper bounds of the target range (2.25% -2.50%). 3/ The implicit distribution of the reference rate is obtained from the changes in interest rates implicit in options over 3-month futures (LIBOR in the U.S. and United Kingdom, EURIBOR in the euro area and bankers acceptance inCanada). The spread between the reference rate and the 3-month rate is assumed to remain constant. The implicit distribution in options is calculated using the Breeden-Litzenberger method.Source: Bloomberg.
The aforementioned environment has strengthened expectations that the central banks of the main advancedeconomies will adopt a more accommodative monetary policy.
Advanced Economies
End of2020
End of2019
Federal Reserve 2/
Bank of Japan
European Central Bank
Bank of England
May 28, 2019December 31, 2018October 01, 2018
Implied target rate in OIS curve
Bank of Canada
Quarterly Report January - March 2019
Dec 31, 18Oct 01, 18 May 28, 19 Reference rate
United Kingdom0.75%
Canada1.75%
United States2.375%
Euro area-0.40%
ModeOct 01, 18: 3.13%Dec 31, 18: 2.49%May 28, 19: 2.31%
ModeOct 01, 18: 2.52%Dec 31, 18: 1.71%May 28, 19: 1.78%
ModeOct 01, 18: 1.16%Dec 31, 18: 0.94%May 28, 19: 0.76%
ModeOct 01, 18: -0.17%Dec 31, 18: -0.30%May 28, 19: -0.41%
Forecasts
![Page 8: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/8.jpg)
88
90
92
94
96
98
100
102
104
106
Jan-
16Ap
r-16
Jul-1
6O
ct-1
6Ja
n-17
Apr-
17Ju
l-17
Oct
-17
Jan-
18Ap
r-18
Jul-1
8O
ct-1
8Ja
n-19
Apr-
19
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
Sep-
17
Jan-
18
May
-18
Sep-
18
Jan-
19
May
-19
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-
16
May
-16
Sep-
16
Jan-
17
May
-17
Sep-
17
Jan-
18
May
-18
Sep-
18
Jan-
19
May
-19
Quarterly Report January - March 2019 7
During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policystance. This trend became more evident in recent weeks due to the increase in trade tensions between the U.S.and China and the consequent deterioration of the economic outlook.
2-year 10-year
US Dollar Indices: DXY 1/ andTrade Weighted Index 2/
Index Dec-31-2015 = 100
Source: Bloomberg. Source: Bloomberg. 1/ DXY index estimated by Intercontinental Exchange (ICE) based on the weightedgeometric mean of the dollar’s value compared with a basket of 6 other majorcurrencies: EUR: 57.6%, JPY: 13.6%, GBP: 11.9%, CAD: 9.1%, SEK: 4.2% and CHF: 3.6%.Base=100. 2/ Trade-weighted Index of the Federal Reserve; main trade partners:China (21.3%), Eurozone (16.38%), Canada (12.7%), Mexico (11.9%), Japan (6.9%),South Korea (3.9%), United Kingdom (3.35%).Source: Bloomberg.
United Kingdom
United States
Euro area
May
JapanUS dollarappreciation
May
United Kingdom
United States
Euro area
Japan
May
Advanced Economies: Government Bonds Interest Rates %
DXY
Trade WeightedIndex (TWI)
![Page 9: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/9.jpg)
-90
-70
-50
-30
-10
10
30
50
70
90
110
130
150
170
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
Weeks
20082014
2015
2016
2017
2018
2019
8
In this scenario, in which some of the risks for the global economy had been mitigated, investors showed agreater risk appetite, reflected in an increase in capital flows to emerging economies. In recent weeks, as tradetensions escalated, this favorable performance reversed.
Global Risk Appetite IndexIndex
Accumulated Capital Flows 1/
Billions of dollarsNominal Exchange Rate against USD
Index Jan-01-2017 = 100
Source: Credit Suisse. 1/ The sample covers funds used for the buying-selling of stocks andbonds from emerging countries, recorded in advanced countries(includes debt and equity). Flows exclude portfolio performanceand exchange rate fluctuations.Source: Emerging Portfolio Fund Research.
Fuente: Bloomberg.
Quarterly Report January - March 2019
-5
-3
-1
1
3
5
7
2012
2013
2014
2015
2016
2017
2018
2019
50
80
110
140
170
200
80
90
100
110
120
130
140
Jan-
17
Apr-
17
Jul-1
7
Oct
-17
Jan-
18
Apr-
18
Jul-1
8
Oct
-18
Jan-
19
Apr-
19
Euphoria
Panic
Risk appetite
May
ChileColombia
Turkey
Brazil
Mexico
Depreciation
South Africa May
May 22
Emerging Economies
![Page 10: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/10.jpg)
1
2
3
4
Outline
5
Inflation
Monetary policy
Current situation of the Mexican economy
External conditions
Quarterly Report January - March 2019 9
Forecasts and final remarks
![Page 11: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/11.jpg)
10
The weakness exhibited by the Mexican economy at the end of 2018 intensified in Q1 2019, reflecting bothexternal and domestic factors, some of which are of a transitory nature.
0.6
0.9
0.6
0.8
0.3
-0.7
1.0
0.5 0.
61.
30.
41.
10.
61.
01.
2-0
.10.
60.
41.
11.
00.
60.
3-0
.30.
91.
3-0
.40.
70.
0-0
.2
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2012
2013
2014
2015
2016
2017
2018
2019
90
95
100
105
110
115
120
80
90
100
110
120
130
140
2012
2013
2014
2015
2016
2017
2018
2019
Gross Domestic ProductQuarterly % change, s. a.
Global Index of Economic ActivityIndex 2013=100, s. a.
s. a. / Seasonally adjusted figures.Source: Mexico’s National Accounts System (SCNM, for its acronym inSpanish), INEGI.
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2013.Source: Mexico’s National Accounts System (SCNM, for its acronym inSpanish), INEGI.
Note: The long-term trend of the coincident and leading indicators is representedby the line located at 100. The dates signal the month and year in which aninflexion point was observed in the leading indicator. The negative figures inparenthesis indicate the number of months in which a given inflexion point of theleading indicator precedes the inflexion point of the coincident indicator.Source: INEGI.
Quarterly Report January - March 2019
Q1 2019
Services (62.7%)
Total
Industrial (34.2%)
Agriculture and livestock (3.2%)
March
System of Cyclical IndicatorsPoints
95
96
97
98
99
100
101
102
103
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
FebruaryMarch
Feb 2009(-4)
Sep 2007(-8)
Leading
Coincident
![Page 12: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/12.jpg)
70
80
90
100
110
120
2012
2013
2014
2015
2016
2017
2018
2019
90
100
110
120
130
140
2012
2013
2014
2015
2016
2017
2018
2019
90
100
110
120
130
140
2012
2013
2014
2015
2016
2017
2018
2019
11
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2013.1/ Trade includes wholesale and retail trade.Source: Mexico’s National Accounts System (SCNM, for its acronym in Spanish), INEGI.
Quarterly Report January - March 2019
Mining (22.3%)
Manufacturing (49.7%)
Construction (23.3%)
Utilities (4.7%)
March
Industrial ActivityIndex 2013=100, s. a.
Total Professional, management of companies and
enterprises (8.9%)
March
Transportation and information (14.0%)
Public administration (7.1%)
Finance and real state (23.8%)
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2013.Source: Mexico’s National Accounts System (SCNM, for its acronymin Spanish), INEGI.
IGAE ServicesIndex 2013 = 100, s. a.
March
Trade 1/ (28.8%)
Accommodation and food services (3.6%)
Arts, entertainment, and recreation (3.8%)
Educational and health care (9.9%)
The decline in economic activity was due to the contraction of both secondary and tertiary activities.
![Page 13: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/13.jpg)
85
90
95
100
105
110
115
120
125
130
135
2012
2013
2014
2015
2016
2017
2018
2019
Quarterly Report January - March 2019 12
25
33
41
49
57
65
1.2
1.6
2.0
2.4
2.8
3.2
2012
2013
2014
2015
2016
2017
2018
2019
90
95
100
105
110
115
25
30
35
40
45
50
2012
2013
2014
2015
2016
2017
2018
2019
Total Private Consumptionand Components
Index 2013=100, s. a.
RemittancesBillion of USD and of constant pesos, s. a.
Consumer Confidenceand Total Real Wage Bill
Response balance and index 2013=100, s. a.
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2013.Source: Mexico’s National Accounts System (SCNM, for its acronym inSpanish), INEGI.
s. a. / Seasonally adjusted figures.1/ Prices as of the second fortnight of July 2018.Source: Banco de México and INEGI.
s. a. / Seasonally adjusted figures.Source: Prepared by Banco de México with data from INEGI’s NationalEmployment Survey (ENOE), and the National Consumer ConfidenceSurvey (ENCO), INEGI.
US dollars
Mexican pesos 1/
March
At the end of 2018 and during the reported period, private consumption exhibited a weak performance.Remittances and consumer confidence remain at high levels.
Q1 2019
Real wagebill
Consumerconfidence
AprilFebruary
Imported goods (10%)
Total
Domestic Services (45%)
Domestic goods (45%)
![Page 14: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/14.jpg)
90
95
100
105
110
115
120
125
2012
2013
2014
2015
2016
2017
2018
2019
60
70
80
90
100
110
120
130
140
2013
2014
2015
2016
2017
2018
2019
Quarterly Report January - March 2019 13
Gross fixed investment continued exhibiting a weak performance, despite the rebound observed in January,which was due to specific factors.
Investment and its ComponentsIndex 2013=100, s. a.
Real Value of Construction Output byContracting Institutional Sector 1/
Index 2013=100, s. a.
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2013.Source: Mexico’s National Accounts System (SCNM, for its acronym inSpanish), INEGI.
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2018.1/ Seasonally adjusted by Banco de México, except for total construction.Source: Prepared by Banco de México with data from ENEC, INEGI.
90
100
110
120
130
140
150
2012
2013
2014
2015
2016
2017
2018
2019
February
Construction(61%)
Imported machineryand equipment (23%)
Total
Domestic machineryand equipment (15%)
Public (42.8%)
Private residential housing (18.7%)
Private (57.2%)
Private excl. residential housing (38.5%)
Total
April
s. a. / Seasonally adjusted figures.Note: The figure in parentheses represents its participation in 2018.Source: Banco de México with data from SAT, SE, Banco de México, INEGI. Mexico’sMerchandise Trade Balance. SNIEG. Information of National Interest.
Imports of Capital GoodsIndex 2013=100, s. a.
Excluding power generation andtelecom sector (87.5%)
Total
March
![Page 15: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/15.jpg)
Quarterly Report January - March 2019 14
1/ Responses from the Monthly Survey of Regional Economic Activity (EMAER, for its acronym in Spanish) associated with the question: In your opinion, which three main factors will limit economic activity growth in your state in the next six months?2/ Responses from the Survey of Private Sector Forecasters associated with the question: Which three main factors will limit economic growth in the next six months?Source: Monthly Survey of Regional Economic Activity (EMAER, for its acronym in Spanish) and Survey of Private Sector Forecasters.
External conditions
Domestic economic conditions
Public finances
Governance
Monetary policy
InflationInflation and
monetary policy
28.640.5
01020304050
20.97.6
1.85.4
01020304050
19.031.5
01020304050
15.9 17.1
01020304050
8.0 3.6
01020304050
Business representatives’ opinion Private sector analysts’ opinion
Box 3. Factors that Might Hinder Mexico’s Economic Growth According to Analysts and Business Representatives’ Opinions
Inflation
12.28.9
5.21.3
1.0
11.95.4
3.6
4.53.1
8.13.3
2.31.51.5
1.10.9
0.3
4.03.4
2.01.7
1.31.0
0.80.7
0.60.4
4.42.2
1.4
14.411.7
2.71.8
9.9
0.9
0.9
0.94.5
9.01.8
5.4
14.40.9
0.91.8
0.99.9
1.8
0.9
0.9
2.70.9
Public insecurity problemsDomestic political uncertainty
CorruptionImpunity
Lack of rule of law
Increase in inputs and commodity pricesInflationary pressures in Mexico
Wage increases
Current monetary policyHigh cost of domestic financing
Uncertainty over the domestic economic situationDomestic market weakness
Households' level of indebtednessFirms' level of indebtedness
Absence of structural change in MexicoAvailability of domestic financing in Mexico
Oil production platformLack of market competition
Exchange rate uncertaintyReal exchange rate level
Juncture factors: foreign trade policyExternal market and world economy weakness
International financial market instabilityInternational political instability
Juncture factors: US monetary policyCrude oil export prices
External interest rate levelsJuncture factors: US fiscal policy
Contraction of supply of foreign resources
Tax policyPublic spending policy
Public sector's level of indebtedness
Monetary policy
Percentage Distribution of Responses from Analysts and Business Representatives when Consulted on the Three Main Factors that Could Hinder Economic Activity Growth in the Next Six Months 1,2/
Figures in % as of March 2019
![Page 16: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/16.jpg)
Quarterly Report January - March 2019 15
Box 3. Factors that Might Hinder Mexico’s Economic Growth According to Analysts and Business Representatives’ Opinions
Analysts and Business Representatives
Percentage Distribution of Responses from Analysts and Business Representatives when Consulted on the Three Main Factors that Could Hinder Economic Activity Growth in the Next Six Months 1,2/
InflationPublic finances Other
Monetary policy
Jan 2016 Jul 2016 Feb 2017 Jan 2019 Mar 20191/ Responses from the Survey of Private Sector Forecasters associated with the question: Which three main factors will limit economic growth in the next six months?2/ Responses from the Monthly Survey of Regional Economic Activity (EMAER, for its acronym in Spanish) associated with the question: In your opinion, which three main factors will limit economic activity growth in your state in the next six months?Source: Monthly Survey of Regional Economic Activity (EMAER, for its acronym in Spanish) and Survey of Private Sector Forecasters.
GovernanceDomestic economic conditions
Analysts
0
10
20
30
40
50
60
70
80
90
100
2013
2014
2015
2016
2017
2018
2019
0
10
20
30
40
50
60
70
80
90
100
Anal
ysts
Busin
ess
repr
esen
tativ
es
Anal
ysts
Busin
ess
repr
esen
tativ
es
Anal
ysts
Busin
ess
repr
esen
tativ
es
Anal
ysts
Busin
ess
repr
esen
tativ
es
Anal
ysts
Busin
ess
repr
esen
tativ
es
External conditions
![Page 17: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/17.jpg)
80
90
100
110
120
130
140
150
160
2012
2013
2014
2015
2016
2017
2018
2019
80
90
100
110
120
130
140
2012
2013
2014
2015
2016
2017
2018
2019
16
In an environment of loss of dynamism of world trade and persisting trade tensions, Mexican manufacturingexports continued to decelerate in Q1 2019.
Total Automotive and Non-automotive
Quarterly Report January - March 2019
Manufacturing ExportsIndex 2013 = 100, s. a.
s. a./ Seasonally adjusted series based on data in nominal USD.Note: The figure in parentheses represents its participation in 2018.Source: Prepared by Banco de México with data from Mexico’s Tax Administration Service (SAT, for its acronym in Spanish), the Ministry of the Economy (SE, for its acronym in Spanish), Banco de México, the National Institute of Statisticsand Geography (INEGI, for its acronym in Spanish). Mexico’s Merchandise Trade Balance, and National System of Statistical and Geographical Information (SNIEG, for its acronym in Spanish). Information of national interest.
Automotive (35.8%)
Non-automotive (64.2%)
April
Total
United States (82.3%)
Rest of the world
(17.7%)
April
![Page 18: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/18.jpg)
17
The Mexican economy has registered a significant reduction in financing from external sources, which has been partlyoffset by an increase in domestic financing sources and a lower absorption of resources by the public sector. Externalaccounts have reverted their medium-term trend, currently showing a surplus in the non-oil trade balance and a deficitin the oil trade balance.
Sources and Uses of Financial Resources of the EconomyAnnual flows as % of GDP
Trade BalanceUSD million
Current Account% of GDP
Source: SAT, SE, Banco de México, INEGI. Mexico’s Merchandise Trade Balance.SNIEG. Information of national interest. Note: Bars in darker blue refer to the first quarter of each year.
Source: Banco de México and INEGI.
Quarterly Report January - March 2019
2.4 3.0 3.0 3.9 2.2 2.2
4.7 4.3 4.0 2.62.3 2.1
1.3
-1.5 0.0 -0.4
0.1 0.2
9.75.7
7.4 7.9
5.1 5.3
2014 2015 2016 2017 2018 Q1 2019
5.6 4.6 5.5 6.54.2 4.2
4.11.1
1.9 1.40.9 1.1
9.75.7
7.4 7.9
5.1 5.3
2014 2015 2016 2017 2018 Q1 2019
Note: Annual flows as a percentage of GDP in each reported quarter refer to the total sources and uses of financialresources in the last four quarters, expressed as a % of average nominal GDP of the same four quarters.1/ Corresponds to domestic financial assets (aggregate F1), composed of monetary and non-monetary domesticsources. 2/ Includes monetary instruments held by non-residents (i.e. the aggregate MNR, which is the differencebetween M4 and M3) and other non-monetary external sources (external debt of the Federal Government andpublic agencies and companies, commercial banks’ external liabilities, external financing to the nonfinancial privatesector, and funds raised by agencies, among others). 3/ Refers to the loan portfolio of financial intermediaries, theNational Housing Agencies (Infonavit and Fovissste), the issuance of domestic debt and external financing of firms.4/ As stated in Banco de México’s Law. 5/ Includes capital accounts, and earnings and other assets and liabilities ofcommercial and development banks, of non-bank financial intermediaries, of the National Housing Agency(Infonavit) and Banco de México –including securities issued by Banco de México for monetary regulation purposes,especially those related to sterilizing the monetary impact of the operational surplus. It includes non-monetaryliabilities from the Institute for the Protection of Bank Savings (IPAB) as well as the effect of the valuation changesof public debt instruments, among other concepts. 6/ Excluding the effect of Banco de México’s operational surplusturned in to the federal goverment. Source: Banco de México.
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-5
-4
-3
-2
-1
0
1
2012
2013
2014
2015
2016
2017
2018
2019
Sources
Uses
Q1 2019
Annual data
Current account
-1.6
-2.5-1.9
-2.6 -2.3
-1.7 -1.8
Domestic 1/
External 2/
Internationalreserves 4/
Private sectorfinancing 3/
Public sectorFinancing 6/
Total
TotalOther concepts 5/
Q1 2019
Non-oil
Oil
Total
![Page 19: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/19.jpg)
-4
-3
-2
-1
0
1
2
3
4
5
6
7
2012
2013
2014
2015
2016
2017
2018
2019
-2
0
2
4
6
8
10
12
14
16
Jan-
17M
ar-1
7M
ay-1
7Ju
l-17
Sep-
17N
ov-1
7Ja
n-18
Mar
-18
May
-18
Jul-1
8Se
p-18
Nov
-18
Jan-
19M
ar-1
9
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Quarterly Report January - March 2019 18
Labor Market Gap: Unemployment Rate 1/
Percentage points, s. a.
s. a. / Seasonally adjusted figures.1/ Shadows represent confidence bands. The interval corresponds to twoaverage standard deviations among all estimates.Source: Prepared by Banco de México with data from ENOE (INEGI).
March Q1 2019
Nominal
Real
Slack conditions in the labor market are estimated to have eased somewhat in Q1 2019, reflecting the economy’scyclical phase and the effects of wage increases on both employment and informal labor.
2/ During Q1 2019, an average of 20.3 million workers were registered at IMSS.Real wages were deflated using the CPI.3/ Integrated by the municipalities mentioned in the DOF of December 26,2018, most of which share boundary with the northern border.Source: Prepared by Banco de México with data from IMSS.
Wage IndicatorsAnnual % change
Average Wage of Salaried Workers According to National Employment Survey (ENOE) 4/
(Formal and Informal Sectors)
4/ To calculate the average nominal wage, the bottom 1 percent and thetop 1 percent in the wage distribution are excluded. Individuals withincome reported as zero or those who did not report income are excluded.Source: Prepared by Banco de México with data from INEGI (ENOE).
Daily Wage Associated withIMSS-insured Workers 2/
April
Northern border (nominal) 3/
National(nominal)
National (real)
![Page 20: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/20.jpg)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
-12
-10
-8
-6
-4
-2
0
2
4
6
8
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-6
-5
-4
-3
-2
-1
0
1
2
3
4
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
19
As to the economy’s cyclical position, it is estimated that economic slack conditions loosened towards the endof 2018 and during Q1 2019.
Output Gap 1/
% of potential output, s. a.Monthly Slack Index 3/
%
s. a. / Seasonally adjusted figures.1/ Output gap estimated with a tail-corrected Hodrick-Prescott filter; see Banco de México (2009), “InflationReport (April-June 2009)", p.74.2/ Excludes both oil and gas extraction, support activities for mining, and petroleum and coal products'manufacturing.Note: Output gap confidence interval calculated with a method of unobserved components. The dotted linerefers to the confidence interval for the gap calculated excluding the oil industry while the blue area is theinterval corresponding to the total GDP.Source: Prepared by Banco de México with INEGI data.
3/ Index constructed using the Model Confidence Set (MCS) methodology; see Banco de México’s InflationReport, October – December 2017. The monthly slack index is based on the first main component of a set of 11indicators. The first component represents 50.6% of the joint variation of monthly indicators. Gray linescorrespond to individual slack indicators used in the analysis of Principal Components.Source: Prepared by Banco de México with data from INEGI and Banco de México.
GDP
GDP excluding oilindustry 2/
FebruaryQ1 2019
Quarterly Report January - March 2019
![Page 21: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/21.jpg)
1
2
3
4
Outline
5
Inflation
Monetary policy
Current situation of the Mexican economy
External conditions
Quarterly Report January - March 2019 20
Forecasts and final remarks
![Page 22: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/22.jpg)
Quarterly Report January - March 2019 21
As anticipated, annual headline inflation decreased in Q1 2019 in relation to Q4 2018. This result is explained,fundamentally, by the fall in the non-core inflation component, while core inflation remained high. Nonetheless,in March, headline inflation rose as compared to the previous month and in April such upward trend becamestronger; and, in the first fortnight of May, inflation lied at 4.43%.
Consumer Price IndexAnnual % change
1/ Since 2003, a permanent inflation target of 3%, with a variability interval of +/-1%, was established for headline inflation.Source: Banco de México and INEGI.
6.41
4.43
3.77
0
1
2
3
4
5
6
7
8
9
10
11
12
13
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
CPI
Core
Non-core
1F May
Inflation target 1/
![Page 23: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/23.jpg)
22
Although the significant decline in non-core inflation was largely related to lower variations of energy prices,this behavior has started to revert since the second fortnight of February 2019, pressuring again annual non-core inflation.
-5
0
5
10
15
20
Feb-
16Ap
r-16
Jun-
16Au
g-16
Oct
-16
Dec-
16Fe
b-17
Apr-
17Ju
n-17
Aug-
17O
ct-1
7De
c-17
Feb-
18Ap
r-18
Jun-
18Au
g-18
Oct
-18
Dec-
18Fe
b-19
Apr-
19
-5
0
5
10
15
20
Feb-
16Ap
r-16
Jun-
16Au
g-16
Oct
-16
Dec-
16Fe
b-17
Apr-
17Ju
n-17
Aug-
17O
ct-1
7De
c-17
Feb-
18Ap
r-18
Jun-
18Au
g-18
Oct
-18
Dec-
18Fe
b-19
Apr-
19
Non-core Energy Products
Profit Margin for Energy Product SalesPesos per liter and ratio
1/ In certain cases, the sum of inflation’s components may not add up due to rounding.Source: Calculated by Banco de México with INEGI data.
2/ The margin of each gas station is estimated on a daily basis as the difference between the pricereported by the Energy Regulatory Commission (CRE, for its acronym in Spanish) for each gas stationand the price at Pemex’s wholesale point of sale that is the closest to that gas station. The margin atthe national level is a simple average of the margin of all gas stations in the country except for the gasstations in the Northern border states, which benefited from the fiscal stimuli implemented startingon January 1, 2019. 3/ Refers to the ratio between LP gas consumer price and the price of the first-hand sale (PPI). Source: Prepared by Banco de México with data from INEGI, PEMEX, CRE andBloomberg (Gas LP Mont Belvieu).
Quarterly Report January - March 2019
1F May
Government-authorized prices
Energy products
Agriculture
Non-core
Non-core and Energy Price Subindex 1/
Annual incidences in percentage points
Electricity
LP gas
Natural gas
Gasoline
Energy products
1F May 1.0
1.5
2.0
2.5
1.0
1.5
2.0
2.5
Dec-
17Ja
n-18
Feb-
18M
ar-1
8Ap
r-18
May
-18
Jun-
18Ju
l-18
Aug-
18Se
p-18
Oct
-18
Nov
-18
Dec-
18Ja
n-19
Feb-
19M
ar-1
9
CPI LP gas / first-hand sales price 3/
Sales margin of Magna-grade gasoline 2/
March
![Page 24: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/24.jpg)
-2
-1
0
1
2
3
4
5
6
7
2016
2017
2018
2019
23
Risks to core inflation are still perceived. In April, it increased and within its components, food merchandiseprices have been increasing while several services have registered high inflation levels. Thus, although coreinflation decreased in the first fortnight of May, it remains at high levels.
Core Inflation Trend MeasuresAnnual % change
MerchandiseAnnual % change
Services excl. Housing and EducationAnnual % change and incidences
in percentage points
Quarterly Report January - March 2019
Core Price Subindex
Non-food merchandise
1F May
Services excl. housing and education (annual % change)
Tourism
Telecommunications
Food Health and personal care
Rest of services
0
1
2
3
4
5
6
7
8
9
2013
2014
2015
2016
2017
2018
2019
Merchandise
Food, beverages and tobacco
1F May0
1
2
3
4
5
6
2013
2014
2015
2016
2017
2018
2019
Core Price Subindex
Supercore Price Subindex
Trimmed mean Indicator 1/
1F May
1/ The Trimmed Mean Indicator excludes the contribution of extreme variations in the prices of some generic items to the inflation of a price index. To eliminate the effect of these changes, the following is done: i) monthly seasonally adjusted changes of the generic items ofthe price index are arranged from the smallest to the largest value; ii) generic items with the largest and the smallest variation are excluded, considering in each distribution tail up to 10 percent of the price index basket, respectively; and iii) using the remaining genericitems, which by construction lie closer to the center of the distribution, the Trimmed Mean Indicator is calculated. Source: Prepared by Banco de México with own data and data from INEGI.
![Page 25: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/25.jpg)
1
2
3
4
Outline
5
Inflation
Monetary policy
Current situation of the Mexican economy
External conditions
Quarterly Report January - March 2019 24
Forecasts and final remarks
![Page 26: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/26.jpg)
Quarterly Report January - March 2019 25
Monetary policy conduction
To guide its monetary policy actions, Banco de México’s Governing Board followsclosely the development of inflation vis-à-vis its forecasted trajectory, taking intoaccount the time frame in which monetary policy operates as well as availableinformation on all inflation determinants and on medium- and long-term inflationexpectations, including their balance of risks.
It also considers that monetary policy must respond prudently if for any reason theuncertainty faced by the economy increases considerably.
Although headline and core inflation have increased, these developments areconsidered to be transitory and the current monetary policy stance consistent withthe convergence of inflation to its target within the time frame in which monetarypolicy operates.
![Page 27: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/27.jpg)
Quarterly Report January - March 2019
Monetary Policy Rate and Consumer Price Index% and annual % change
1/ The data shown up to January 20, 2008 corresponds to the overnight interbank interest rate.Source: Banco de México and INEGI.
2
4
6
8
10
12
14
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Target for the overnightinterbank interest rate 1/
May
Headline inflation
1F May
Headline inflation target
26
The target for the overnight interbank interest rate has remained at 8.25% throughout 2019.
![Page 28: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/28.jpg)
Quarterly Report January - March 2019
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-
14
Jul-1
4
Jan-
15
Jul-1
5
Jan-
16
Jul-1
6
Jan-
17
Jul-1
7
Jan-
18
Jul-1
8
Jan-
19
2.5
3.0
3.5
4.0
4.5
Jan-
17M
ar-1
7M
ay-1
7Ju
l-17
Sep-
17N
ov-1
7Ja
n-18
Mar
-18
May
-18
Jul-1
8Se
p-18
Nov
-18
Jan-
19M
ar-1
9
For the end of 2019 and 2020 Long term
Source: Banco de México’s Survey (monthly periodicity).
2020
2019
Next 5-8 years
Next 4 years
Inflation target
Citibanamex next 3-8 years
Inflation ExpectationsMedian, %
April
27
Headline inflation expectations for the end of 2019 and for 2020 decreased between December 2018 andMarch 2019 and then were adjusted upwards in April, while core inflation expectations increased. Medium-and long-term inflation expectations showed more stability. Is noteworthy that expectations for all terms haveremained visibly above the 3% target.
Source: Banco de México’s Survey (monthly periodicity) andCitibanamex Survey (biweekly periodicity).
Source: Banco de México estimates with Valmer and Bloomberg data.
Break-even Inflation and Inflation RiskImplied in Bonds
%HeadlineCore
20-day moving average
10-year bond break-eveninflation
MayAprilMay
![Page 29: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/29.jpg)
7.5
8.0
8.5
9.0
9.5
1 1 3 6 1 2 3 5 10 20 30
Quarterly Report January - March 2019
Nominal Exchange Rate 1/
Pesos per US dollarVolatility-adjusted 3-month Interest RateSpread for Selected Emerging Countries 2/
Index
1/ Observed exchange rate refers to the daily FIX Exchange Rate. Numbers in front ofthe analysts’ expectations correspond to the averages in the Banco de México surveyfor April and the Citibanamex survey for May 21th, 2019.Source: Banco de México and Citibanamex.
28
The more favorable conditions in international financial markets that prevailed since the beginning of January up to thelast part of March, have contributed to improve the performance of financial assets in Mexico. Since late December todate, the Mexican peso registered lower volatility and appreciated considerably. During most of Q1 2019, interest ratesin Mexico declined for all terms, although at the margin they increased slightly.
2/ Brazil, Chile, Colombia, Turkey, South Africa, South Korea and Poland.Source: Bloomberg.
Source: Proveedor Integral de Precios (PiP).
Yield Curve%
17
18
19
20
21
22
23
24
Oct
-16
Dec-
16Fe
b-17
Apr-
17Ju
n-17
Aug-
17O
ct-1
7De
c-17
Feb-
18Ap
r-18
Jun-
18Au
g-18
Oct
-18
Dec-
18Fe
b-19
Apr-
19Observed Exchange Rate
Analysts’ Expectation 2019 Banxico 19.90
Analysts’ Expectation 2020 Citibanamex 20.26Analysts’ Expectation 2020 Banxico 20.34Analysts’ Expectation 2019 Citibanamex 20.00
Jun.29, 18
May 28, 19
Sept.28, 18
Dec.31, 18
-0.3
-0.1
0.1
0.3
0.5
0.7
0.9
1.1
1.3
1.5
2014
2015
2016
2017
2018
2019
Range
Emerging economies’ averageMexico
May May
Months YearsDay
19.17
![Page 30: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/30.jpg)
1
2
3
4
Outline
5
Inflation
Monetary policy
Current situation of the Mexican economy
Forecasts and final remarks
Quarterly Report January - March 2019 29
Forecasts and final remarks
![Page 31: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/31.jpg)
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Central scenario previous report
Central scenario current report
Quarterly Report January - March 2019 30
Fan Chart: GDP GrowthAnnual %, s. a.
s. a. / Seasonally adjusted figures.Source: INEGI and Banco de México.
Economic Activity Outlook
Increase in number of IMSS-insured jobs(Thousands)
Report Oct-Dec 2018 Jan-Mar 2019
2019 620 – 720 530-6302020 650 – 750 650-750
GDP Growth(%)
Report Oct-Dec 2018 Jan-Mar 2019
2019 1.1 – 2.1 0.8-1.82020 1.7 – 2.7 1.7-2.7
2019Q4
2020Q4
2013 2014 2015 2016 2017 2018 2019 2020
Current account deficit
(% of GDP)
Report Oct-Dec 2018 Jan-Mar 2019
2019 2.0 1.92020 2.0 1.9
![Page 32: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/32.jpg)
31Quarterly Report January - March 2019
Risks to GrowthWithin the forecast horizon, the balance of risks for economic activity has become more uncertain and remains biased to the downside.
Upward risks:
Downward risks:
That USMCA is formalized and serves to trigger investment. That the dynamism of industrial production in the United States contributes to improve the performance of Mexican exports. That a greater-than-foreseen dynamism of aggregate demand is observed, due to an increase in consumer spending or that some
productive sectors face better conditions to increase their investments.
That uncertainty arises regarding the possibility of an escalation of trade disputes worldwide. That episodes of volatility are observed in international financial markets. A greater-than-expected slowdown of the world economy and global trade. That the process of ratifying and implementing USMCA is delayed and generates more uncertainty, thus affecting investment. Greater domestic uncertainty that may affect investment and consumption. That the credit rating of Pemex or that of Mexico deteriorate. That the production or distribution of goods and services is affected again.
![Page 33: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/33.jpg)
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4
Observed
Central scenario previous report
Central scenario current report
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4
Observed
Central scenario previous report
Central scenario current report
Quarterly Report January - March 2019 32
As for the economy’s cyclical position, slack conditions are expected to remain loose throughout the forecasthorizon.
Output Gap Estimate% of potential output, s. a.
s. a. / Seasonally adjusted figures.Source: Banco de México.
Note: i) The forecast of the current report’s central scenario begins in Q1 2019, while theforecast of the previous report’s central scenario begins in Q4 2018. ii) The expected behaviorof this indicator is consistent with the forecast for the output that excludes the oil sector. iii)It is not feasible to calculate a fan chart for a quarterly slack index because of the nature withwhich the forecast was constructed.Source: Banco de México.
Output Gap Estimate Excludingthe Oil Sector
% of potential output, s. a
Quarterly Slack Index
2013 2014 2015 2016 2017 2018 2019 2020s. a. / Seasonally adjusted figures.Source: Banco de México.
Fan Charts
2013 2014 2015 2016 2017 2018 2019 2020
2019Q4
2019Q4
2020Q4
2019Q4
2020Q4
Forecast2020
Q4
-3
-2
-1
0
1
2
3
-3
-2
-1
0
1
2
3
Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4
Observed
Central scenario previous report
Central scenario current report
2013 2014 2015 2016 2017 2018 2019 2020
![Page 34: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/34.jpg)
0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.58.0
0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.58.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed inflationCentral scenario previous reportCentral scenario current reportHeadline inflation target
0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.58.0
0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.58.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed inflationCentral scenario previous reportCentral scenario current reportHeadline inflation target
Annual Headline Inflation 1/
%
Quarterly Report January - March 2019 33
1/ Quarterly average of annual inflation. The next four and six quarters are indicated as of second quarter of 2019, that is, the second and fourth quarters of 2020, respectively, periods in which the monetary policytransmission channels fully operate. */ Forecast since May 2019. Source: Banco de México and INEGI.
4Q 6QNext
Annual Core Inflation 1/
%
Fan chart
4Q 6QNext
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
2018 2021Q4 Q1 Q2* Q3 Q4 Q1 Q2 Q3 Q4 Q1
Current 3.7 3.6 3.8 3.6 3.4 3.4 3.0 3.0 3.0 3.0Previous 3.7 3.5 3.6 3.4 3.2 3.2 2.9 2.8 2.7
2019 20202018 2021Q4 Q1 Q2* Q3 Q4 Q1 Q2 Q3 Q4 Q1
Current 4.8 4.1 4.3 4.0 3.7 3.8 3.2 3.1 3.0 3.0Previous 4.8 4.1 4.3 3.8 3.4 3.5 3.1 2.8 2.7
2019 2020
Forecasts for annual headline inflation are adjusted slightly upwards due to previsions of increases in energyprices and to the recent increases in core inflation, particularly, the greater-than-expected increases in the pricesof certain services.
The previous revisions have an influence on short-term forecasts and their effect is considered to be transitory,and thus forecasts show a convergence to Banco de México’s target in Q3 2020. As for core inflation, expectationsare that it will lie at 3% starting Q2 2020.
![Page 35: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/35.jpg)
Quarterly Report January - March 2019 34
Upward risks:
Risks to Inflation
Downward risks:
Although there has been an intensification of some downside risk factors, like the greater slack in the economy, there areothers that could make inflation remain at high levels and, therefore, deviate from its foreseen path, given the factorsthat have restrained core inflation from decreasing.
That the peso exchange rate comes under pressure due to external or domestic factors. That greater pressures on energy prices or on agricultural and livestock product prices are observed. That protectionist and compensatory measures escalate globally. That public finances deteriorate. That given the magnitude of the increases to the minimum wage, in addition to their possible direct impact, there is the risk that these
bring about high wage revisions in several sectors.o In fact, in some sectors these have exceeded productivity gains and could give rise to cost pressures, affecting formal employment and
contributing to keep core inflation at high levels, preventing the widening of economic slack from translating into lower pressures on inflation.
That the persistence shown by core inflation leads to a greater resistance to decline of medium- and long-term inflation expectations.
That lower variations in the prices of some non-core items take place. That slack conditions widen more than anticipated.
![Page 36: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/36.jpg)
Quarterly Report January - March 2019 35
Final Remarks To address the challenges and lags the Mexican economy faces, it is necessary to adopt and maintain
policies aimed at setting solid foundations for economic growth so as to correct the structural andinstitutional problems that have impeded the country from attaining higher levels of productivity andwhich have also discouraged investment in the country.
Strengthening the rule of law is a priority. Thus, in addition to fighting insecurity and tacklingcorruption and impunity, the competent authorities guarantee legal certainty, compliance with thelegal framework, and respect for private property.
A clear agenda of long-term policy goals aimed at fostering an adequate microeconomic functioning,competition and a more efficient use of resources of the economy is also needed, together with astrong macroeconomic framework characterized by fiscal discipline and price stability wouldcontribute to build certainty and to generate greater confidence in the country.
The above would allow to promote investment, raise productivity and increase the country’s potentialgrowth, thus leading to a greater welfare for all Mexicans.
![Page 37: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/37.jpg)
Quarterly Report January - March 2019 36
Annex – Boxes
Evolution of Negotiations Regarding the United Kingdom’s Decision to Leave theEuropean Union (Brexit).
Factors that Might Hinder Mexico’s Economic Growth According to Analysts andBusinesses Opinions.
1
3
Effect of US Tariff Measures Imposed on China on Mexico’s Share in US Imports.
Considerations Regarding Mexico’s 2019 Labor Reform.
2
4
5 Services Inflation and Higher Production Costs in the First Quarter of 2019.
6 Influence of Competition on Gas Stations’ Sales Margins and on Consumer Prices.
![Page 38: Presentación de PowerPoint€¦ · Quarterly Report January - March 2019. 7. During most of Q1 2019, interest rates in the U.S. decreased given the more accommodative monetary policy](https://reader033.vdocument.in/reader033/viewer/2022050610/5fb156bc439e48533d59ad61/html5/thumbnails/38.jpg)