Mexico’s manufacturing industry to grow 2.9% this year, says BBVA forecast

3 August, 2018

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Mexico's manufacturing industry will grow 2.9% this year driven by exports of automotive or electronic goods and despite the uncertainty over the renegotiation of the North American Free Trade Agreement (NAFTA), according to a forecast by BBVA Bancomer, the country’s largest bank.

"The forecast is that the sector will grow 2.9% and the main manufactures that will grow are electronics, transport, machinery or equipment", oriented to exports, said the economist of BBVA Bancomer, Samuel Vazquez, in the presentation of the report "Sectoral-Regional Situation".

According to the study of the first semester of the year, wholesale sales (based on manufacturing) will grow 4.3% and retail sales (focused on domestic consumption) will grow by 3.4%. In both cases, the rise will be above the average growth of the economy, he said.

Preliminary data from the National Institute of Statistics and Geography (Inegi) released this week, Mexico's gross domestic product (GDP) increased 2.7% in the second quarter of 2018 compared to the same period in 2017.

This growth forecast, according to the study, assumes that the negotiation of NAFTA between Mexico, the United States and Canada will come to fruition this year or next.

"It would not make sense to break an agreement that has been so beneficial for the three," said Carlos Serrano, an economist at BBVA Bancomer, a subsidiary of Spain's BBVA.

With regard to the automotive industry, Serrano stressed that production continues to grow, and this year will close with a 5% increase. This sector is the focus of negotiation of NAFTA, which seek to guarantee the use of products manufactured in the region. However, Serrano noted that domestic auto sales will fall by the end of the year 6% due to inflation and its impact on real wages and financing.

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