Richard Melson

November 2005

Banamex

http://www.banamex.com

Banco Nacional de México, S.A.,

integrante de Grupo Financiero Banamex.
Isabel la Católica 44. Col. Centro Histórico. Del. Cuauhtémoc. C.P. 06000,

México, Distrito Federal, México.

Synthesis

GRAPH 1: MEXICO: COUNTRY RISK AND EXCHANGE RATE

The Week’s Notes

Gross Fixed Investment in August ’05 (10.2% Annual, 2.58% Monthly)

In August, productive investment registered its fastest annual growth rate in four months, i.e. up 10.2% (table 1), exceeding our expectation (9.2%). Seasonally-adjusted, it grew by 2.6% vs. July. Its advance was driven by machinery and equipment purchases, mainly imported goods, while construction maintained meager growth.

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The Motorized Vehicle Industry in Mexico, October, 2005

Results for the industry in October were mixed (table 2). Light vehicles improved substantially: exports grew (by 24.3%) and so did production (16.7%) –thus its accumulated advances in 2005 will return to positive rates. However, heavy motorized vehicle performance was not altogether favorable: foreign sales fell and production slowed significantly with respect to the two-digit rates registered throughout the greater part of the year.

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Inflation (October/05: Monthly 0.25%; Annual 3.05%)

The inflation result for October was good (table 3), in line with our estimate and below the consensus. Annual inflation again reached a historic low, and was practically in line with Banxico’s target of 3.0%. Nonetheless, we consider that the convergence of the result in October towards the official target is only temporary as inflationary pressures exist that will affect the performance of inflation during the last two months of the year.

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Mexican Manufacturing Exports to the United States in September/05: 6.6% Annual

In September, total manufacturing exports from Mexico registered a good annual growth-rate. Nevertheless, the U.S. foreign trade figures showed that Mexico’s products continued to lose their market share in the United States during the month (graph 2).

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TABLE 1: GROSS FIXED INVESTMENT: AUGUST

TABLE 2: THE AUTO INDUSTRY IN OCTOBER

 

TABLE 3: INFLATION: OCTOBER

GRAPH 2: USA: MANUFACTURING IMPORTS

USA, Weekly Balance for November 11th, 2005

There were mixed data during the week. The economy maintains a good rate of growth, and the fall in energy prices in the past few weeks will help strengthen consumer spending in the next few months and to temper the inflationary pressures. A first reflection of this was the improvement in consumer confidence (graph 3) and the reduction in import prices. The growth of the trade deficit in September registered the effects of Hurricane Katrina on petroleum prices and production, and is expected to decline in October. The figures do not modify the expectation of at least two more increases in the FED’s reference rate.

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Financial Markets (11/Nov/05)

The yield curve shows declines along its long section in parallel with the movement of external rates, and along the short section the decline of the 28-day to levels of 8.78% confirms market expectations that in November less monetary restriction will continue, an expectation that is strengthened by the good results for inflation in October and by the continuous downward adjustment in its expectations.

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Industrial Activity in September’05: 1.0% Annual y 1.0% Monthly

Figures for industrial production in September were mixed. Although in annual terms growth was deceptive, seasonally-adjusted it registered an acceleration in its monthly rate, this being the third consecutive positive monthly figure.

In terms of annual growth, which was lower than we were anticipating, the weakness of non-maquiladora manufacturing was surprising, given the good performance of its exports during the month and the production of one of its key branches, motorized vehicles. This suggests a contraction in production together with the other branches of the non-maquiladora segment. Meanwhile, construction, the second segment in terms of its weighting, continued to register a low annual growth rate.

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Outlook and Forecast

On Wednesday, the figures for GDP in the third quarter will be released. We estimate an annual advance in the economy of 3.4% (the quarter annualized at around 10%), for the service sector 4.4%, industry 0.6% (now known) and farming 10%.

On Friday, the open unemployment rate for October will be released. We are expecting it to be 3.65% of the work force, after 3.7% in September.

GRAPH 3: USA: CONSUMER CONFIDENCE

TABLE 4: INDUSTRIAL ACTIVITY, SEPTEMBER 2005

TABLE 5: FORECASTS

 

Edited by: Sergio Kurczyn B.*oiam

Banco Nacional de México, S.A., integrante de Grupo Financiero Banamex.
Isabel la Católica 44. Col. Centro Histórico. Del. Cuauhtémoc. C.P. 06000, México, Distrito Federal, México.

Banamex Mexico

November 7, 2005