Economy & Business - October 2003
Still waiting
Businessmen and the authorities are becoming increasingly gloomy about the economic outlook. The notion, put about by the government, that 2004 should be substantially better than this year, is taking a knock. The influential Centro de Estudios Económicos del Sector Privado (Ceesp), said that it does not expect much of an improvement in the economy next year. The finance ministry has already lowered its growth forecast for 2004. It now reckons that the economy will grow by 3.1%. It had been forecasting a rate of 3.5%. The Ceesp calls the new target conservative, but realistic. This year, the ministry set off hoping for 3% growth: it now accepts that growth will be around 1.5% and inflation will be around 3.8%.
Even the 3.1% growth rate implies quite a pick-up on the current rate of growth. After the poor first half of this year, for the economy to grow by 1.5% this year it will have to grow by 1.8% in the second half of the year. Even if the economy does hit the 1.5% annual growth rate, it is not much to write home about. In per capita terms it is insignificant. Assuming that the government hits its revised target for 2003, per capita income in its first three years will have fallen by 2%.
In the first half of the year, the economy grew by 1.2%. In the third quarter, growth will be about 1.5%. This means that in the final quarter growth will have to be at least 2% for the government to hit its target.
Only mediocre
As one of the country's leading economic commentators, Enrique Quintana, put it: the good news is that the economy is growing. The bad news is that the growth rate is only modest. To be fair, there are signs from the demand side that the worst might be over.
Unemployment fell back slightly in September. The open unemployment rate dipped under 4%, to 3.87%, confounding sceptics. The drop in the rate means that 106,000 jobs were created in the month. Sceptics point out that the figures are probably flattered by the restart of the academic year, which has reduced the number students classifying themselves as job seekers.
What should be concerning policymakers is that the pick-up in employment this year has been weaker than usual. The number of people in proper jobs (ie, paying into the social security fund, IMSS) on 15 October was 53,742 down on the same day of 2002. This year there were 12.288m people in IMSS registered jobs. Of these jobs 87% were permanent and 13% were temporary. This means that the number of people in IMSS registered jobs is 0.4 of a percentage point lower than at 15 October 2002.
More detailed statistics point to a very weak labour market, especially for the better paid and economically stimulative jobs in the manufacturing industry. The official statistics agency Inegi provided evidence of the problems facing Mexican manufacturing. In August, the number of people employed in manufacturing was 4.3% lower than in the same month of 2002. The number of hours worked was down by a thumping 6.7%. Despite the slackness of the labour market, wages in manufacturing are still going up. They were up 1.3% in real terms over the past year. The industries worst hit are metal bashing (down 9%) and textiles (down 7%). The wood industry saw its payroll fall by 5.5%.
Although the latest unemployment figure (for September) puts the jobless rate at 3.87%, down from 3.96% in August, this fall is little to brag about. Unemployment in Mexico is defined as people over 12 who are looking for work but have not had even one hour of paid employment in the week before the survey. The country has a labour force of 42m people; so 1.63m are without any sort of paid work. Around 10m people are reckoned to work in the informal economy.
Retail sales
Equally worrying on the demand side is the weak state of the domestic market. The retailers association (Antad), which, however, excludes the country's biggest retailer, Wal Mart de México, showed year-on-year sales in September rising by just 0.5%. For the third quarter, Antad sales were up by 1.6%.
The detailed figures show that self-service stores are doing significantly worse than specialist and department stores. Self-service stores' sales were down by 2.9% in September while they were down by 1.2% in the quarter. This weak performance shows that ordinary people are more cautious about spending than the middle classes, who tend to frequent specialist and department stores.
Even the 3.1% growth rate implies quite a pick-up on the current rate of growth. After the poor first half of this year, for the economy to grow by 1.5% this year it will have to grow by 1.8% in the second half of the year. Even if the economy does hit the 1.5% annual growth rate, it is not much to write home about. In per capita terms it is insignificant. Assuming that the government hits its revised target for 2003, per capita income in its first three years will have fallen by 2%.
In the first half of the year, the economy grew by 1.2%. In the third quarter, growth will be about 1.5%. This means that in the final quarter growth will have to be at least 2% for the government to hit its target.
Only mediocre
As one of the country's leading economic commentators, Enrique Quintana, put it: the good news is that the economy is growing. The bad news is that the growth rate is only modest. To be fair, there are signs from the demand side that the worst might be over.
Unemployment fell back slightly in September. The open unemployment rate dipped under 4%, to 3.87%, confounding sceptics. The drop in the rate means that 106,000 jobs were created in the month. Sceptics point out that the figures are probably flattered by the restart of the academic year, which has reduced the number students classifying themselves as job seekers.
What should be concerning policymakers is that the pick-up in employment this year has been weaker than usual. The number of people in proper jobs (ie, paying into the social security fund, IMSS) on 15 October was 53,742 down on the same day of 2002. This year there were 12.288m people in IMSS registered jobs. Of these jobs 87% were permanent and 13% were temporary. This means that the number of people in IMSS registered jobs is 0.4 of a percentage point lower than at 15 October 2002.
More detailed statistics point to a very weak labour market, especially for the better paid and economically stimulative jobs in the manufacturing industry. The official statistics agency Inegi provided evidence of the problems facing Mexican manufacturing. In August, the number of people employed in manufacturing was 4.3% lower than in the same month of 2002. The number of hours worked was down by a thumping 6.7%. Despite the slackness of the labour market, wages in manufacturing are still going up. They were up 1.3% in real terms over the past year. The industries worst hit are metal bashing (down 9%) and textiles (down 7%). The wood industry saw its payroll fall by 5.5%.
Although the latest unemployment figure (for September) puts the jobless rate at 3.87%, down from 3.96% in August, this fall is little to brag about. Unemployment in Mexico is defined as people over 12 who are looking for work but have not had even one hour of paid employment in the week before the survey. The country has a labour force of 42m people; so 1.63m are without any sort of paid work. Around 10m people are reckoned to work in the informal economy.
Retail sales
Equally worrying on the demand side is the weak state of the domestic market. The retailers association (Antad), which, however, excludes the country's biggest retailer, Wal Mart de México, showed year-on-year sales in September rising by just 0.5%. For the third quarter, Antad sales were up by 1.6%.
The detailed figures show that self-service stores are doing significantly worse than specialist and department stores. Self-service stores' sales were down by 2.9% in September while they were down by 1.2% in the quarter. This weak performance shows that ordinary people are more cautious about spending than the middle classes, who tend to frequent specialist and department stores.
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Problems
on the supply side
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Not only does the government face a looming budget crunch, but it also has to contend with a domestic economy that is still weakening. Whether the government will hit its lower 2004 growth target must be moot. Industrial activity is still declining. End of preview - This article contains approximately 2200 words Subscribers: Log in now to read the full article Not a Subscriber? Enquire Now |