Mexico | Manufacturing lost dynamism in 4Q22; headwinds in 2023

While manufacturing gained momentum in the middle of last year as bottlenecks abated, the sector has lost momentum in recent months as demand slows amid higher interest rates.

Key points

• Key points:
• The BBVA Multidimensional Manufacturing Indicator (BBVA MMI) grew 4.9% in December (YoY), taking the average year-on-year variation for 4Q22 to 6.1%, 0.4 pp below the average in 3Q22.
• According to INEGI industrial production figures, the automotive sector (20% of manufacturing production) slowed down since the end of 3Q22, currently standing at a level 3% below that observed in the pre-pandemic period (after having recovered in August).
• Alongside the slower growth in the transport sector is the slowdown in the chemical industry (7% of production), standing at a level 5% below that observed in January 2020.
• The most recent figures from the US ISM manufacturing indicators point to a deceleration in external demand, with the subcomponents of new orders and new export orders reaching contraction territory since 3Q22.
• We anticipate the context of higher financing costs will continue to weigh on domestic and external demand for durable goods and that the low dynamism of manufacturing will continue in 2023.

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