Last month, we published a note where we pointed out that consumption had grown steadily at the start of this new cycle. In the first eight months of 2023, consumption expanded 4.3% YoY on average and is currently 7.5% above its pre-pandemic average. Our assessment of private consumption remains positive.
In the four previous presidential elections, consumption has usually lost steam until the next government settles. However, we think this time might be different; that is, that consumption will continue to grow throughout 2024, albeit at a slower pace, based on the strength of the labour market and sound growth of wages. In fact, we expect the demand component with the most growth in coming quarters will be services consumption.
In our note “Mexico’s 3Q23: the cycle is thriving despite headwinds” we said that the economy could achieve growth of more than 3.4%. We now see factors to support these favourable dynamics well into next year, allowing growth to near 3.0% again.
We still think that monetary policy easing will take place prior to consensus expectations, although we acknowledge that Banco de México’s Board will remain cautious in upcoming meetings.