quarterly report - banxico.org.mxa... · quarterly report july –september 2015 after having...
TRANSCRIPT
Quarterly Report
November 04, 2015
July-September 2015
11
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
22Quarterly Report July – September 2015
3
Monetary Policy Conduction
3Quarterly Report July – September 2015
After having converged to the permanent 3 percent target, headlineinflation decreased further since May 2015 and registered newhistorical minimum levels. To this contributed:
1. The monetary policy stance.
2. A negative output gap.
3. Effects of price reductions of widely used inputs, as well as goods andservices whose prices decreased as a result of the implementation ofstructural reforms.
4Quarterly Report July – September 2015
The favorable evolution of inflation has been achieved in a difficulteconomic environment.
Domestic Environment:
The relative price adjustment,associated with national currency’sdepreciation, has mainly beenreflected in durable goods’ prices.
Moderate growth of economic activity.
External Environment:
Global growth remains at very lowlevels.
Uncertainty with respect to thenormalization process of the U.S.monetary policy continues.
Well-anchored inflation expectations.
→ All this has been reflected in financialassets’ price drops at the global level.
Greater concern regarding the depthof China’s and other emergingeconomies’ deceleration.
5
Taking these elements into account, the Board of Governors decided tomaintain the Overnight Interbank Interest Rate target at 3 percent, by virtue ofthe fact that it considered the monetary policy stance to be conducive to theconsolidation of the convergence of inflation to the permanent 3 percent target.
2
3
4
5
6
7
8
9
10
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Target for the Overnight Interbank Interest Rate 1/
%
1/ The Overnight Interbank Interest Rate is shown until January 20, 2008.Source: Banco de México.
5
November
Quarterly Report July – September 2015
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
66Quarterly Report July – September 2015
0
1
2
3
4
5
6
7
8
9
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Quarterly Report July – September 2015
7
GDP GrowthAnnual % change
Headline Annual Inflation Annual % change
World economic activity continued weakening.
Source: IMF, WEO April and October 2015. Source: IMF, WEO April and October 2015.
World
Advanced
Emerging
Forecast
0
1
2
3
4
5
6
7
8
9
20
10
20
11
20
12
20
13
20
14
20
15
20
16
World
Advanced
Emerging
ForecastApril 2015October 2015
April 2015October 2015
World Economy
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
20
13
20
14
20
15
-4
-2
0
2
4
6
8
10
12
20
10
20
11
20
12
20
13
20
14
20
15
3Q-2015
Quarterly Report July – September 2015
8
The U.S. economy grew moderately in the third quarter. To this contributedthe solid domestic demand, which offset the strong disaccumulation ofinventories.
Real GDP and ComponentsQuarterly % change at annual rate
and percentage points contributions, s. a.
Industrial and Manufacturing Production
Quarterly % change at annual rates, s. a.
Change in Non-farm Payrolls and Unemployment Rate
Thousands of jobs and % of EAP, s. a.
s. a. / Seasonally adjusted data.Source: Bureau of Economic Analysis (BEA).
s. a. / Seasonally adjusted data.Source: Federal Reserve.
EAP/ Economically Active Population.s. a. / Seasonally adjusted data.Source: Bureau of Labor Statistics (BLS).
Industrial Production
Manufacturing Production
3Q-20152
3
4
5
6
7
8
9
10
11
-800
-600
-400
-200
0
200
400
600
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Change in non-farm payrolls
Unemployment rate
September
Public Expenditure
Net Exports
Inventories
Fixed Investment
Private Consumption
Total
United States
Quarterly Report July – September 2015
9
In the Euro zone, economic recovery continued, although at a lower rate thanexpected, with large heterogeneity among the member countries.
Economic Sentiment Indicator and Consumer Confidence
Standardized data from period 2000-2007
Industrial Production 2/
Index Dec-2007=100, s. a.
1/ Composite indicator, which summarizes five sectorial confidence indicators:industry, services, retail, construction and consumptionSource: Haver Analytics.
s. a. / Seasonally adjusted data.2/ Excluding construction industry.Source: Eurostat.
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
20
10
20
11
20
12
20
13
20
14
20
15
September
Consumer Confidence
Economic Sentiment Indicator1/
60
65
70
75
80
85
90
95
100
105
110
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
August
Germany
ItalyFrance
Spain
Euro Zone
Euro Zone
Quarterly Report July – September 2015
10
Economic activity in emerging economies keeps slowing down.
Industrial ProductionAnnual % change of 3-month
moving average
ExportsAnnual % change of 3-month
moving average
Source: Haver Analytics and INEGI. Source: Haver Analytics and INEGI.
-15
-10
-5
0
5
10
15
20
25
30
35
20
10
20
11
20
12
20
13
20
14
20
15
September
-40
-20
0
20
40
60
80
20
10
20
11
20
12
20
13
20
14
20
15
September
Brazil
Chile
China
Colombia
India
MexicoPeru
Russia
Brazil
Chile
China
Colombia
India Mexico
Peru
Russia
Emerging Economies
60
65
70
75
80
85
90
95
100
105
110
Jan
-15
Feb
-15
Mar
-15
Ap
r-1
5
May
-15
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
Oct
-15
No
v-1
525
40
55
70
85
100
115
130
145
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
Mexican Oil Mix
WTI
Futures 1/
Quarterly Report July – September 2015
11
Crude Oil PricesUSD per barrel
Commodities Prices 2/
Index Jan-2005=100
1/ Data up to November 03, 2015.Source: Bloomberg.
2/ It refers to the Thomson Reuters’ CRB index composed by 19 raw materials divided in 4groups: energy (39%), agriculture (41%), precious metals (7%) and industrial metals (13%).Source: Bloomberg.
Commodity prices decreased during most of the third quarter of 2015,although they showed certain recovery in October.
Agriculture
Energy
IndustrialMetals
Total
November
Quarterly Report July – September 2015
12
Inflation in the main advanced economies decreased during the periodcovered by this Report. Emerging economies presented a mixedinflationary performance.
Advanced EconomiesAnnual % change
Emerging EconomiesAnnual % change
Source: Haver Analytics. Source: Haver Analytics and INEGI.
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
20
10
20
11
20
12
20
13
20
14
20
15
September-3
-2
-1
0
1
2
3
4
5
6
7
20
10
20
11
20
12
20
13
20
14
20
15
September
Brazil
ChileChina
Colombia
India
Mexico
Peru
Russia
United States
Japan
United Kingdom
Euro Zone
Headline Inflation
78
81
84
87
90
93
96
99
102
Feb
-13
Jun
-13
Oct
-13
Feb
-14
Jun
-14
Oct
-14
Feb
-15
Jun
-15
Oct
-15
Quarterly Report July – September 2015
13
In international financial markets, uncertainty regarding thenormalization process of the U.S. monetary policy continues.
Expected Monetary Policy Rates 1/
%U.S. Dollar Index (DXY) 2/
Index 1-Jan-2013=100
1/ The expected rates are the trajectories implicit in OIS Curves (Overnight IndexSwap).Source: Bloomberg with estimates from Banco de México.
2/ DXY index is estimated by the Intercontinental Exchange (ICE) based on theweighted geometric mean of the dollar's value compared with a basket of 6 othermajor currencies which are: EUR: 57.6%, JPY: 13.6%, GBP: 11.9%, CAD: 9.1%, SEK:4.2%, and CHF: 3.6%. Source: Bloomberg.
Depreciation
November
-0.35
-0.05
0.25
0.55
0.85
1.15
1.45
1.75
No
v-1
3
Jun
-14
Dec
-14
Jul-
15
Jan
-16
Au
g-1
6
Mar
-17
Sep
-17
European Central Bank
Bank of England
Federal Reserve
End of 2015 End of 2016 End of 2017
Implied target rate in OIS curve, Sep. 15, 2015
Implied target rate in OIS curve, Nov. 03, 2015
Quarterly Report July – September 2015
14
-80
-60
-40
-20
0
20
40
60
80
100
120
140
1 4 7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
Weeks
2008
2009
2010
2012
2013
2014
20152011
Accumulated Capital Flows(Debt and Equity) 1/
Billions of dollars
Nominal Exchange Rate against USDIndex 01-Jan-2013 = 100
1/ The sample covers funds used for the buying-selling of stocks and bonds fromemerging countries, recorded in advanced countries. Flows exclude portfolioperformance and changes in the exchange rate.Source: Emerging Portfolio Fund Research. Source: Bloomberg.
14
Oct.-28
The aforementioned was reflected in a drop in capital flows to emergingeconomies, with its consequent effect on their exchange rates.
90
100
110
120
130
140
150
160
170
180
190
200
210
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Korea
Chile
Colombia
South Africa
Depreciation
Brazil
Mexico
November
Emerging Economies
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
1515Quarterly Report July – September 2015
0.2
0.5
-0.1
-1.9
-3.9
-1.0
2.1
1.7
1.3 1.3
0.9
0.8 1
.10
.81
.50
.7 0.9
1.3
0.3
0.9
0.7
-1.2
1.2
0.3 0
.5 0.8
0.6 0.7
0.4 0.5 0.6
-5
-4
-3
-2
-1
0
1
2
3
4
I 200
8
III 2
008
I 200
9
III 2
009
I 201
0
III 2
010
I 201
1
III 2
011
I 201
2
III 2
012
I 201
3
III 2
013
I 201
4
III 2
014
I 201
5
III 2
015
80
90
100
110
120
130
140
150
160
90
94
98
102
106
110
114
118
122
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Quarterly Report July – September 2015
In the third quarter of the present year, economic activity in Mexico maintainedthe moderate growth pace registered since the beginning of 2015.
Gross Domestic ProductQuarterly % change, s.a.
Global Indicator of Economic Activity
Index 2008=100, s.a.
s.a. / Seasonally adjusted data.1/ The GDP data for the third quarter of 2015 corresponds to preliminaryestimates published by the INEGI.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
16
3Q 2015 1/
Services
Total
Industrial Production
Agricultural August
16
Quarterly Report July – September 2015
As regards to economic activity from the production side, the industrialsector showed a slow growth pace.
85
90
95
100
105
110
115
120
125
130
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Industrial ActivityIndex 2008=100, s.a.
80
85
90
95
100
105
110
40
60
80
100
120
140
160
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Mining SectorIndex 2008=100, s.a.
s. a. / Seasonally adjusted data.Source: Monthly Indicator of Industrial Activity, Mexico’s System of NationalAccounts, INEGI.
s. a. / Seasonally adjusted data.Source: Monthly Indicator of Industrial Activity, Mexico’s System of NationalAccounts, INEGI.
17
Mining of metal and non-metal
minerals
Services related to mining
Crude oil mining
August
MiningConstruction
Electricity
Manufacturing
August
17
30
50
70
90
110
130
150
170
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Non-Oil Exports
18
Total, Oil and Non-Oil ExportsIndex 2008=100, s.a.
Manufacturing ExportsIndex 2008=100, s.a.
s. a. / Seasonally adjusted data.Source: SAT, Secretaría de Economía, Banco de México, INEGI. México´sGoods Trade Balance. SNIEG. National Interest Information.
s. a. / Seasonally adjusted data.Source: SAT, Secretaría de Economía, Banco de México, INEGI. México´sGoods Trade Balance. SNIEG. National Interest Information.
Exports kept exhibiting a relative stagnation.
Quarterly Report July – September 2015
50
70
90
110
130
150
170
190
210
230
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Total
Automotive
Non-automotive
SeptemberSeptember
Total
Oil Exports
Quarterly Report July – September 2015
19
Gross fixed investment continued showing a moderate dynamism at thebeginning of the quarter subject of this Report.
Investment and its ComponentsIndex 2008=100, s.a.
Imports of Capital GoodsIndex 2008=100, s.a.
Residential and Non-Residential Construction Investment
Index 2008=100, s.a.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: SAT, Secretaría de Economía, Banco deMéxico, INEGI. México´s Goods Trade Balance.SNIEG. National Interest Information.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
60
70
80
90
100
110
120
130
140
150
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Total
National machinery and
equipment
Construction
Imported machinery and
equipmentAugust
70
75
80
85
90
95
100
105
110
115
120
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
80
85
90
95
100
105
110
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Non-residential
Residential
AugustSeptember
50
60
70
80
90
100
110
120
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Revenues of Commercial RetailBusiness and Total ANTAD Sales
Index 2008=100, s.a.
Consumer ConfidenceIndex Jan-2003=100, s.a.
Workers’ RemittancesBillion, constant
USD and MXN 1/ , s. a.
s.a./ Seasonally adjusted data.Source: INEGI and elaborated by Banco de Méxicowith data from ANTAD.
s.a./ Seasonally adjusted data.Source: INEGI and Banco de México.
s.a./ Seasonally adjusted data.1/ At prices of the second fortnight of December, 2010.Source: Banco de México.
2020Quarterly Report July – September 2015
Some of the private consumption indicators registered higher growth ratesas compared to the previous quarter.
90
95
100
105
110
115
120
125
130
135
140
90
95
100
105
110
115
120
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
August
ANTAD
September
Revenues of Commercial Retail Business
12.0
17.0
22.0
27.0
32.0
37.0
42.0
1.6
1.8
2.0
2.2
2.4
2.6
2.8
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
September
USD
Pesos
September
Possibility of buying durable goods
Consumer confidence index
21
In face of the moderate economic growth, in the third quarter of 2015 slackconditions persisted in the labor market.
IMSS-Insured Jobs, Employed Population and Total IGAE
Index 2012=100, s. a.
National Unemployment Rate % of EAP, s. a.
IMSS Reference Wage 2/
Annual % change
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
September85
89
93
97
101
105
109
113
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
IMSS-affiliated Jobs1/
Total IGAE
SeptemberAugust
s. a. / Seasonally adjusted data.1/ Permanent and temporary workers in urban areas.Seasonally adjusted by Banco de México.Source: Calculated by Banco de México with data fromIMSS and INEGI (SCNM and ENOE).
EAP/ Economically active population.s. a. / Seasonally adjusted data.Source: National Employment Survey (EncuestaNacional de Ocupación y Empleo), INEGI.
Quarterly Report July – September 2015
EmployedPopulation
2Q 2015
2/ During the third quarter of 2015, on average 17.7million of contributors were registered to IMSS.Source: Calculated by Banco de México with data fromIMSS.
2
3
4
5
6
7
8
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
3Q 2015
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
2222Quarterly Report July – September 2015
Consumer Price IndexAnnual % change
Source: Banco de México and INEGI.
2323
1
2
3
4
5
6
7
8
9
10
11
12
13
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
1F-October
General
CoreVariability Interval
Non-Core
Quarterly Report July – September 2015
In the third quarter of 2015, annual headline inflation exhibited furtherdecreases in addition to those observed in the previous quarter, locatingbelow 3 percent and reaching new historical minimum levels.
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Merchandise
Durables
Non-durables
24
MerchandiseAnnual % change
-2
-1
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
ServicesAnnual % change
Source: Banco de México and INEGI. Source: Banco de México and INEGI.
Core Price Index
24
Services
Education (tuition)
Housing
Other services
Quarterly Report July – September 2015
The effect of the exchange rate depreciation on prices was limited, mainlyaffecting durable merchandise, without generating second round effectsso far.
1F-October1F-October
-3
0
3
6
9
12
15
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Energy and Government Approved Fares
Energy
Government Approved Fares
-15
-9
-3
3
9
15
21
27
33
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Agricultural
Livestock
Fruits and vegetables
AgriculturalAnnual % change
Energy and Government Approved FaresAnnual % change
Source: Banco de México and INEGI. Source: Banco de México e INEGI.
Non-Core Index
25
1F-October 1F-October
25Quarterly Report July – September 2015
The average annual growth rate of the non-core price index continuedslowing down.
-10
-8
-6
-4
-2
0
2
4
6
8
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
3Q 2015
Output Gap 1/
% of potential output, s. a.
s.a. / Calculated with seasonally adjusted data.1/ Estimated using the Hodrick-Prescott (HP) filter with tail correction method; see Banco de México (2009), “Inflation Report April–June2009”,p.69.The shaded area is the 95% confidence interval of the output gap, calculated with an unobserved components method.2/ The GDP data for the third quarter of 2015 corresponds to preliminary estimates published by the INEGI .Source: Calculated by Banco de México with data from INEGI.
26
GDP /2
IGAE
26Quarterly Report July – September 2015
In light of the abovesaid, slack conditions are expected to persistin the economy in the coming years, although gradually declining.
August
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Break-even Inflation Decomposition 1/
%
Annual Headline Inflation ExpectationsMedian, %
1/The inflation risk Premium is calculated with data from Valmer and Bloomberg,based on the methodology described in Box 1 “Decomposition of the Break-evenInflation ” of the Quarterly Report October-December 2013.
Source: Survey of private sector economic analysts’ expectations, Banco deMéxico.
27
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
27
Next 4 years
Next 5-8 years
Variability Interval
End of 2016
End of 2015
October
Inflationary risk premium
Long-term inflation expectation
Break-even inflation implicit in 10-year bonds
3.07
-0.14
3.22
Quarterly Report July – September 2015
Inflation expectations implicit in long-term market instruments remainedstable, while survey-based ones for the end of 2015 kept decreasing.
September
Quarterly Report July – September 2015
28
11.5
12.5
13.5
14.5
15.5
16.5
17.5
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Exchange Rate 1/
Pesos per USD
4
6
8
10
12
14
16
18
20
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Implied Volatility in ForeignExchange Rate Options 2/
%
1/ The latest data for the observed exchange rate is November 03, 2015.Source: Banco de México.
2/ Refers to implied volatility in one-month options.Source: Bloomberg.
Exchange rate 16.42
The Mexican peso, just like other emerging economies’ currencies,registered an additional depreciation in the third quarter of 2015. Part ofthis depreciation reverted in October.
November November
29
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
International ReservesUSD billion
Foreign Exchange Commission Preemptive Steps to Provide Liquidity
to the FX Market:
Source: Banco de México and International Monetary Fund.
23-October
International Reserves
IMF’s Flexible Credit Line
The reduction in international reserves during the third quarter was due to thecontinuation of the USD auction mechanisms, determined by the Foreign ExchangeCommission.
Quarterly Report July – September 2015
December 2014: Daily auctions of dollars of
up to USD 200 million at a minimum price.
March 2015: Daily auctions of USD 52
millions without a minimum price.
May 2015: The extension until September 29,
2015 of the auction period of USD 52 millions
without a minimum price.
July 2015: The increment in the amount of
auctions without a minimum price from USD
52 to 200 million, and the decrease of the
threshold from 1.5% to 1.0%, to activate the
auctions with a minimum price, both
mechanisms until September 30, 2015.
September 2015: The extension until
November 30, 2015 of both mechanisms.
5.0
5.3
5.6
5.9
6.2
6.5
6.8
25
35
45
55
65
75
85
jun
. 13
sep
. 13
dic
. 13
mar
. 14
jun
. 14
sep
. 14
dic
. 14
mar
. 15
jun
. 15
sep
. 15
30
Interest rates in Mexico showed declines for different terms and trading conditionsin the debt market have improved.
Trading Conditions Index in Debt MarketIndex, %
Note: The index is calculated based on the average volatility bias, kurtosis, buyingand selling differential, all these intraday operation of Dec- 24 Bond, and dailytrading volume. From them, the percentiles are calculated in the period 2013-2015 and the average of the six percentiles for each day is taken.Source: Brokers Interbancarios with calculations of Banco de México.
Dec.-24 bond yield
Conditions index
November
Worsening of conditions
Quarterly Report July – September 2015
Government Securities’ Interest Rates 1/
%
1/ Since January 21, 2008, the one-day (overnight) interest rate corresponds to thetarget for the Overnight Interbank Interest Rate.Source: Proveedor Integral de Precios (PiP).
2
3
4
5
6
7
8
9
10
11
12
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
1 day
10 years
30 years
1 year
3 months
2 years
November
31
Total government securities’ holdings by foreign investors remained relativelystable and spreads between Mexican and U.S. interest rates behaveddifferentiated.
Government Securities’ Holdings by Foreign Investors
MXN billion
Mexico and United States Interest Rate Spreads
Percentage points
1/ Includes: Bondes, Bondes D, Bonos, Cetes and Udibonos.Source: Banco de México.
Source: PiP, Banco de México and U.S. Treasury Department.
Quarterly Report July – September 2015
2.5
3.0
3.5
4.0
4.5
Jan
-14
Mar
-14
Jun
-14
Au
g-1
4
No
v-1
4
Feb
-15
Ap
r-1
5
Jul-
15
Oct
-15
November
1 day
10 years30 years
1 year
3 months
2 years
0
400
800
1,200
1,600
2,000
2,400
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
October
Total 1/
Bonds
CETES
Outline
Monetary Policy1
Economic Activity in Mexico3
Inflation Determinants4
Forecasts and Balance of Risks5
External Conditions2
3232Quarterly Report July – September 2015
-9-8-7-6-5-4-3-2-10123456789
-9-8-7-6-5-4-3-2-10123456789
Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4
s.a. / Seasonally adjusted data .Source: INEGI and Banco de México.
Fan Charts
GDP Growth(%)
Report Previous Current
2015 1.7 - 2.5 1.9 - 2.4
2016 2.5 - 3.5 2.5 - 3.5
2017 -- 3.0 - 4.0
33
2008 2010 2012 2014 2015 2016 2017
33
Increase in the number of IMSS-insured jobs
(Thousands)
Report Previous Current
2015 560 - 660 640 - 710
2016 600 - 700 630 - 730
2017 -- 660 - 760
Output Gap% of potential output, s.a.
Quarterly Report July – September 2015
Economic Activity Outlook
GDP GrowthAnnual %, s.a.
s.a. / Seasonally adjusted data .Source: INEGI and Banco de México.2008 2010 2012 2014 2015 2016 2017
2015Q4
2017Q4
2016Q4
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4Q2Q4
2017Q4
2015Q4
2016 Q4
A new drop in Mexico’s oil production and/or its price.
A deterioration in international financial market conditions, propitiating anincrease in firms’ financial costs.
An additional deterioration in economic agents’ confidence in light of thepersistence of a weak economy and/or the absence of progress in thestrengthening of the rule of law.
Less dynamism of the automotive sector, given the problems that some of thesector’s participants have experienced at the global level.
A delay in the recovery of the U.S. industrial sector.
Further progress in the implementation of structural reforms.
Risks to the Growth Outlook:
Downward:
Upward:
34
34Quarterly Report July – September 2015
A faster than expected U.S. recovery.
Core Inflation
20
15
20
16
35
At levels close to 3 percent.
35Quarterly Report July – September 2015
Below 3 percent during the rest of the year.
Headline Inflation
20
17 Moderate downward trend, locating at levels closer to
3 percent at the end of the year.
Inflation Outlook
Annual Headline Inflation 1/
%Annual Core Inflation 2/
%
1/ Quarterly average of annual headline inflation.Source: INEGI and Banco de México.
2/ Quarterly average of annual headline inflation.Source: INEGI and Banco de México.
Fan Charts
Inflation is anticipated to remain below 3 percent during the rest of 2015,close to that level in 2016 and with a slight downward trend in 2017, beingcloser to 3 percent by the end of that year.
36
2010 2011 2012 2013 2014 2015 2016 2017 2010 2011 2012 2013 2014 2015 2016 2017
36Quarterly Report July – September 2015
2015 Q4
2017 Q4
2016 Q4
2015 Q4
2017 Q4
2016 Q4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline inflation target
Variability interval
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline inflation target
Variability interval
Downward Upward
That the depreciation propitiates priceincreases for a broad set of goods andservices, and contaminates inflationexpectations. As in the past, Banco deMéxico will be alert to avoid this fromhappening.
37
37
A lower than expected dynamism ofeconomic activity.
Risks to the Inflation Forecast:
That some goods and widely usedinputs continue exhibiting pricedecreases, in some cases as a result ofthe implementation of structuralreforms.
That the national currency reverts partof the depreciation accumulated in theprevious months.
That the gasoline price increases lessthan 3 percent next year.
Quarterly Report July – September 2015
38
Monetary Policy Stance
Considering the facts presented in this Report, Banco deMéxico’s Board of Governors will continue to monitor theperformance of all inflation determinants and its medium- andlong-term expectations, in particular:
The monetary stance of Mexico relative to the U.S.
The pass-through of exchange rate movements onto consumer prices.
The evolution of the degree of slackness in the economy.
All this in order to be able to take the necessary measures in aflexible manner and whenever conditions demand it in order toconsolidate the convergence of inflation to the permanent 3percent target.
Quarterly Report July – September 2015
Challenges to Strengthen Confidence in the Mexican Economy
39
Considering the complex international environment and the expectationsthat it will persist in the future, it is fundamental to maintain a solidmacroeconomic framework in Mexico. Therefore, in addition to the timelyadjustment of the monetary policy stance, it is necessary to:
Concretize the recently proposed efforts in the fiscal front.
Continue implementing structural reforms in an adequate and timely manner.
This will contribute to preserve an environment of confidence towards theMexican economy, distinguishing it from other emerging economies, suchthat the country risk component implicit in interest rates remains at lowlevels.
Finally, as mentioned on previous occasions, it is also necessary tostrengthen institutions and the rule of law, clearly implying an appropriatelegal framework, but especially, its enforcement and full compliance.
39Quarterly Report July – September 2015