Mexico Watch: CPI, GDP forecast, investment, consumer confidence

Fuel prices drive March CPI

Mexico's statistics agency Inegi reported that general inflation came to 0.39% in March compared to February, a result largely in line with expectations, driven by increasing gasoline and household gas prices.

With the result, annual inflation climbed to 4.00% from 3.94% in February, touching the upper end of the central bank target range of 2-4%.

Citibanamex's survey of 25 sector analysts released Friday provided a median estimate of 0.41% and an end-year estimate of 3.69%.

Local lender Banorte, who called for 0.38% m-o-m inflation, said in a note, "We continue to expect general inflation to continue falling in the coming months," adding that they see CPI at year-end come to 3.6%, just above the central bank's estimate of 3.5%.

Banorte said it still sees the central bank making an interest rate cut of 25 basis points to 8.00% on June 27, especially in light of expected government subsidies on electricity.

Bancomer sees slower growth

Mexico's largest bank by assets, BBVA Bancomer, has lowered its GDP growth forecast for 2019 to 1.4% from an earlier estimate of 2.0%, citing a slowdown in US manufacturing among other factors.

Bancomer's chief economist Carlos Serrano, speaking on Monday at the presentation of a Mexico report, said growth was decelerating on the persistence of weak investment, lower exports and uncertainty surrounding the ratification of the Nafta replacement deal, dubbed USMCA in English.

"With respect to exports, we see some troubling signs from both non-oil exports and manufacturing orders from the US," local daily La Jornada reported Serrano as saying.

The reduced forecasts follows a similar decrease from Mexico's finance ministry last week - to a range between 1.1-2.1% from 1.5-2.5%, and the IMF cutting its estimate for Mexico on Tuesday to 1.6% from 2.1%.

Citibanamex's latest survey produced a median growth forecast of 1.5% for this year and 1.8% for 2020.

Investment up, confidence slips

Inegi reported on Monday that gross fixed investment had a modest rebound in January, showing a 1.6% year-on-year increase, backed by a strong advance in construction investment (+2.9% year-on-year) especially in the residential sector.

Banorte, in a note, registered the result as a positive surprise, having estimated only a 0.3% y-o-y increase, adding, that despite positive signs in the report, and the construction activity in particular, "We believe that investment will remain weak."

"In this sense, the lower expectations of global and local growth, as well as limited expectations on the business front and high financing costs, will be some of the factors that represent a challenge for a greater dynamism of the sector," said the bank.

The data follows Inegi's release of March consumer confidence data that showed the first monthly decline since November with the index still near a record high and 36.3% above the level seen in March 2018.