Published On: Mon, Jul 15th, 2019

For the first time in 25 years the Mexico and USA economic cycles sharply diverged

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MEXICO CITY—According to the WSJ, Mexico is slipping toward a recession even as the U.S. economy continues to grow, the first time in 25 years that the neighbors’ economic cycles have fallen sharply out of sync.

The weakening economy is a new challenge for Mexican President Andrés Manuel López Obrador, following last week’s resignation of his finance minister, Carlos Urzúa, who abruptly quit and blamed the administration for putting political goals above economic considerations.

Mexico’s National Statistics Institute reported Friday July 12 that industrial output fell 2.1% between April and May of this year, its sharpest monthly decline in over a decade. That and other recent data suggest that Mexico’s economy may have contracted during the second quarter of the year, in addition to falling by 0.2% in the first three months of the year.

“Mexico is virtually in a recession,” wrote Bank of America economist Carlos Capistran in a client note last week . A recession would put pressure on the administration and Mexico’s central bank to react, either by increasing government expenditures or cutting interest rates, or both, Mr. Capistran said.

A weak economy will make it harder for Mr. López Obrador to deliver on his promises to transform the country through spending on social programs and infrastructure, strain government finances by reducing revenues, and possibly spur more illegal immigration to the U.S.

Mr. López Obrador said Friday he doesn’t expect a recession to happen, and stressed the appreciation of the peso and the drop in inflation since he took office in December…




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