Thursday, June 13, 2024

Mexican business confidence index ended 2022 in decline

An index measuring business confidence in Mexico registered a decrease of 2.99 points in December, to 45.02, the second consecutive decrease and the lowest level seen in the last 22 months. Business confidence fell 10.7 points from December 2021.

The Business Confidence Index (ICE) is based on the Monthly Business Opinion Survey , carried out by the national statistics institute, INEGI. It considers the perspective of business managers in four sectors: manufacturing, construction, commerce and non-financial services, measuring their opinion on the country’s business climate.

Business confidence was negatively impacted by domestic factors such as high inflation and rising interest rates. International factors such as the ongoing conflict in Ukraine, the possibility of a recession in the U.S. and supply chain disruptions are also to blame. This context likely led many private sector survey respondents to the conclusion that it is not a convenient time to invest.

An overhead view of diners seated at wooden tables in Mexico City.
Business leaders were most pessimistic about prospects for the service sector (which doesn’t include financial services). (Regina Victorica / Unsplash)

Business confidence rating is as low as it was in the early months of the COVID-19 pandemic, according to the financial services group Monex.

A lack of business confidence was present in all sectors surveyed, with the most pronounced being in non-financial services, which saw a decrease of 2.3 points compared to November. From December 2021, the sector registered a decrease of 15 points.

Compared to November, business confidence in the manufacturing sector fell 0.2 points, commerce 0.8 points and construction 0.5 points. When compared to December 2021, business confidence in the manufacturing sector fell 3.3 points, commerce 10.7 points and construction 5.6 points.

The respondents, on average, predicted that the service sector would continue being the most negatively impacted in early 2023, and that private consumption would likely remain weak. Decreased confidence in the construction sector reflects a lack of public investment, despite the federal government’s efforts to bolster investment in the southeast through major infrastructure projects such as the Dos Bocas refinery and the Maya Train.

While the manufacturing sector registered a slight decrease in confidence, Monex said there is reason for optimism moving forward, as Mexico and the United States are strategizing to encourage nearshoring.

With reports from El Economista

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