Mexico Industrial Production (Jul.)

The stronger-than-expected 1.1% m/m rise in Mexico’s industrial production in July provides some encouragement that the economy fared well despite the onset of a third virus wave earlier this quarter. That said, the latest surveys point to a worse performance in August, while weakening US demand and ongoing global shortages will hold back Mexican industry over the coming months. CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.
Nikhil Sanghani Emerging Markets Economist
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Latin America Economics Weekly

Chile’s constitution, Brazil fiscal worries mounting

This week marked the two-year anniversary of the mass protests in Chile which caused a political risk premium to emerge in local financial markets and the currency, and we think that lingering political risks will keep them under pressure for some time. Similarly, we think that hard-hit Brazilian assets will continue to fair poorly from here, with suggestions this week that the government will break the spending cap adding to the evidence that the country's public finances will deteriorate in the coming years.

22 October 2021

Latin America Data Response

Mexico Bi-Weekly CPI (Oct.)

The further rise in Mexico’s core inflation rate to a 12-year high of 5.1% y/y in the first two weeks of October, which contributed to the rise in the headline rate to 6.1% y/y, will add to the growing hawkish sentiment at the central bank. However, given the weakness of the economy, we think the tightening cycle will remain gradual with another 25bp rate hike, to 5.00%, at the next meeting in mid-November.

22 October 2021

Latin America Economics Focus

A fresh look at Brazil’s public debt problem

Suggestions that Brazil’s government will raise welfare spending – and circumvent the spending cap in doing so – add to the evidence that there’s little appetite for the long-term fiscal squeeze needed to stabilise the public finances. Taken together with slower growth and higher interest rates, we think that the public debt-to-GDP ratio is likely to be on an upwards trajectory from next year. This feeds into our view that government bond yields will climb higher and that the real will weaken further from here.

20 October 2021

More from Nikhil Sanghani

Latin America Economics Update

Peru: BCRP stepping up pace of tightening

Yesterday’s larger 50bp rate hike, to 1.00%, delivered by Peru’s central bank (BCRP) suggests it is becoming increasingly concerned about the inflation outlook. With inflation set to stay above the 1-3% target range over the coming quarters, and GDP growth likely to beat expectations, we now think that the policy rate will rise to 2.00% by end-2021 and 3.50% by end-2022 (previously 1.25% and 2.75%).

10 September 2021

Latin America Data Response

Mexico Consumer Prices (Aug.)

The drop in Mexico’s headline inflation rate to 5.6% y/y in August masks a further rise in core inflation, to 4.8% y/y, which will be a concern for the central bank. This suggests that its gradual tightening cycle has further to run; we expect another 25bp rate hike to 4.75% at the next meeting later this month.

9 September 2021

Latin America Data Response

Chile Consumer Prices (Aug.)

The further rise in Chile’s inflation to 4.8% y/y in August suggests that the central bank’s tightening cycle has a lot further to run. We expect a further 100bp of rate hikes, to 2.50%, by end-2021 but, given the concerning inflation outlook, the risks are skewed towards more aggressive tightening.

8 September 2021
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