BBVA forecasts slowdown in Mexico’s manufacturing sector at the end of 2023

The Banco Bilbao Vizcaya Argentaria (BBVA) predicts a deceleration in Mexico’s manufacturing sector in the latter half of 2023.

This forecast is primarily due to an anticipated decrease in foreign demand, coupled with the impact of high interest rates and stringent financing conditions in the United States, which may negatively affect durable goods demand.

Nonetheless, BBVA suggests other economic sectors, including consumer spending boosted by real wage and employment increases since 2022, may offset this slowdown.

BBVA’s Multidimensional Manufacturing Indicator for Mexico dropped 1.2% year-on-year in June, marking its first decline since February 2021.

This resulted in a 1.7% increase in the indicator’s average year-on-year variation for the year’s first half, down 2.6 percentage points from 2022.

BBVA suggests this contraction indicates a shift in Mexico’s manufacturing production, considering U.S. durable goods demand weakening.

As Mexico’s economy, the second largest in Latin America, heavily relies on the U.S. economic cycles, an expected U.S. slowdown could result in a 2.3% growth in Mexico’s economy in 2023, as per estimates from analysts consulted by the Bank of Mexico (Banxico).

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