President Donald Trump has made no secret that he thinks Mexico is taking advantage of the United States.
Throughout his campaign and during the first few weeks of his presidency he has railed against our neighbour to the south — specifically over the issue of trade.
Trump called NAFTA the “worst trade deal in the history of the country” and blamed the free trade agreement with Canada and Mexico for job losses, declining wages, and companies shifting manufacturing to Mexico.
Additionally, Trump has threatened to impose a 20% border tax on any imports from Mexico to help pay for his proposed border wall.
Investors are obviously nervous, something that’s best reflected in the volatile peso. But while the Mexican economy has started to show some signs of cracking under the pressure, most notably with consumer confidence cratering to a record low in January as Mexico’s stock market tanked following the election, the hard data still points to a relatively sound economy.
According to preliminary data, the Mexican economy posted growth of 2.2% year-over-year in the fourth quarter, roughly where it has been for the past two years. While that data is from before Trump took office, it does include the weeks leading up to the election and the weeks after Trump’s victory — a time at which he was particularly outspoken about Mexico.
Additionally, Mexico’s auto production rose 4.1% year on year in January. While that’s down from the 8.8% clip experienced in December, it still represents solid growth in the face Trump’s efforts to stop US automakers from importing Mexico-made cars and parts.
Trump has negotiated deals to prevent Ford, GM, Toyota, and others from shifting production to Mexico.
So while the data is sending mixed signals, Capital Economics says there a few things to pay attention to that will indicate whether or not the Mexican economy is “really coming off the rails.”
That list includes a few key indicators, of hard data, like industrial production, retail sales, and private consumption that will provide better clues as to the health of the economy.
As you can see from this data calendar provided by Capital Economics, we’ll get a better picture of Mexico’s economy in March:
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