- Consumption has maintained a steady growth rate at the start of this new cycle. In the first seven months of 2023, consumption expanded 4.4% YoY on average, and is currently 6.9% above its pre-pandemic average.
- We have mentioned in previous reports that the main driver of the recovery of private consumption was the swift upturn of the labour market and the growth of real wages.
- In addition to the fact that we expect labour income, which is the main source of household income, to continue growing in a context where inflation will continue moderating this and next year, households are in a good position financially, i.e. they are not leveraged and have net savings of above 3% of GDP.
- We forecast that GDP expanded around 0.6% in the 3Q23 and that during the whole year it will grow approximately 3.2% YoY. However, it should decelerate towards 2.6% next year. As we mentioned before, inflation is moderating. Banco de México will uphold its current stance and is likely to start cutting rates in 1Q24, to prevent a restrictive monetary stance taking its toll on aggregate demand.
- Read our strategy recommendations in our note “The carry cost and duration effect on the nominal curve,” dated October 5, 2023.