The Day at a Glance | June 19 2023

*The INEGI published the Timely Indicator of Economic Activity (IOAE for its initials in Spanish), which now forecasts a slightly greater slowdown in economic activity during April. 

*Fitch Ratings reaffirmed Mexico´s credit rating of BBB- with a stable outlook. 

*The University of Michigan´s Consumer Sentiment Index in the United States reached a four-month high in June, setting at 63.9 points. Additionally, the one-year inflationary expectation decreased to 3.3%, its lowest reading since March 2021. 

Economic environment

The Timely Indicator of Economic Activity (IOAE) now forecasts slower growth in economic activity during April. The IOAE´s estimate for the Monthly Global Indicator of Economic Activity (IGAE for its initials in Spanish) for the fourth month of 2023 has been revised to 2.4% y/y from the 2.6% expected a month ago. This adjustment came from both the slower growth seen in the secondary sector (1.6% y/y) compared to the previously considered figure (1.7% y/y), as well as a lower forecast for growth of tertiary activities – at 2.6% y/y, down from the previously estimated 2.8% y/y. It´s worth pointing out that the IGAE´s growth in March set at 2.7% y/y, with a 1.5% y/y figure for the secondary sector and a 3.3% y/y figure for the tertiary sector. With this, April´s forecast entails a slowdown in the IGAE due to decreased activity in the tertiary sector. Additionally, the IOAE forecasts a slight rebound for the IGAE in May at 2.5% y/y, boosted by an acceleration in the tertiary sector at 2.9% y/y, while secondary activities will continue slowing down with an expected annual 1.4% figure. 

Credit Rating agency Fitch Ratings informed of its decision to reaffirm Mexico´s BBB- credit rating with a stable outlook. This rating is above investment grade. Additionally, the agency doesn´t expect any changes in the rating over the next 12-18 months. Lastly, Fitch highlighted Mexico´s macroeconomic stability and the stable trajectory of debt relative to GDP. However, regarding growth, it stated that it´s been hindered by investment sluggishness, which has been affected by both pandemic disruptions and unpredictable microeconomic interventions and regulatory uncertainty. In light of this, the credit rating agency pointed out that “nearshoring” is an important opportunity to generate growth in Mexico, given the increasing tensions between the United States and China, as well as manufacturers’ desire to have shorter and more resistant supply chains.