Macro Watch: Mexican FDI, CPI

FDI in Mexico up 11% in 2017

Arriving against the headwinds of significant market uncertainty, Mexico received US$29.7bn in foreign direct investment in 2017, up 11% compared to 2016, according to a report from the economy ministry.

The result easily surpasses analysts' forecast of US$25.6bn, presented in the latest central bank private sector survey taken at the end of January, as well as the economy ministry's own forecast of US$25bn issued at the start of 2017.

The increase in FDI took place despite significant investor concern surrounding the fate of Nafta renegotiations and the broader concerns of a more protectionist US trade regime under President Donald Trump.

Though those concerns were highest for Mexico's manufacturers, that sector received the highest proportion of FDI at 45.3% of the total, followed by transportation, shipping and storage at 10.8%. The construction and trade sectors garnered 10.3% and 9.2%, respectively, while financial services received 9% of the total.

The US was the prime source of Mexico's FDI, accounting for 46.8% of the total, followed by Canada with 9.1% - Mexico's two Nafta partners. Spain provided 9.0% of the total, followed by Germany (8.0%) and Japan (5.5%).

Mexican CPI falls again in February

Annual inflation continued to fall in the first half of February, reaching 5.45%, down from the 5.55% recorded for January, dropping slightly faster than expected on a strong decline in agricultural prices.

State statistics agency (Inegi) reported a 0.20% increase in CPI in the biweekly comparison at mid-month, coming in below Banorte's estimate of 0.31%, which reported external estimates going into the report at between 0.20% and 0.33%.

Upside pressures in the period included higher costs of retail goods and energy prices, which were offset by much lower prices for fruits and vegetables, including a 21.7% drop in tomato prices.

"Moving forward, we continue to expect inflation to continue to show a downward trend to end 2018 at 4.3%," said Banorte. "In the coming months we will be carefully following the prices for energy, as well as for fruits and vegetables."