Quarterly Report
May 25, 2016
January - March 2016
Outline
2Quarterly Report January - March 2016
Monetary Policy1
Forecasts and Balance of Risks4
External Conditions2
Inflation and its Determinants3
February 4, 2016
February 17, 2016Extraordinary session
Rate unchanged at 3.25%.
50 bp increase to 3.75%.
Quarterly Report January - March 2016
3
The Board alerted about the risk to inflation and its expectations, derived fromthe possibility that the depreciation of the national currency may further persistor become more pronounced.
In response to a sudden surge in international financial market’s volatility, adeterioration of the external environment and strong exchange rate fluctuations,all of which could affect inflation and its expectations.
Banco de México carefully weighed the possible effects of both domestic and external factors on theevolution of inflation and its expectations, seeking to define the most appropriate monetary policystance at each point of time.
Inflation has registered a favorable performance, despite a challenging environment.
Quarterly Report January - March 2016
4
The decision of February 17, 2016 was part of a coordinated measure taken together with the Ministry ofFinance.
Banco de México
50 bp increment in the reference rate at an extraordinary session.
Ministry of Finance
Announced a preemptive adjustment to the expenditure of the Federal Public Administration,
concentrated in PEMEX.
Decided to suspend the daily dollar auctions mechanisms,
leaving open the possibility to discretionally intervene, in
exceptional cases.
Foreign Exchange Commission
The implemented measures produced the expected result:
Considerable appreciation of the national currency, a trend that persisted for several weeks.
Increments in short-term interest rates, while longer-term rates went down.
o Significant flattening of the yield curve, as it was intended.
→ The authorities stressed that the key to ensure the anchoring of the national currency would bepreserving sound macroeconomic fundamentals.
5Quarterly Report January - March 2016
Subsequent decisions:
Central scenario for the future evolution of inflation congruent with the 3 percent target.
Neutral balance of risks to inflation.
March 18, 2016
May 5, 2016
Rate unchanged at 3.75%.
Rate unchanged at 3.75%.
Monetary Policy Rates%
1/ Before January 20, 2008 it refers to the observed Overnight Interbank Interest Rate.2/ The upper limit of the target range is showed.Source: Federal Reserve and Banco de México.
0
2
4
6
8
10
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
U.S.: Target Federal Funds Rate 2/
Mexico: Target for the Overnight Interbank Interest Rate 1/
May
6Quarterly Report January - March 2016
Outline
7Quarterly Report January - March 2016
Monetary Policy1
Forecasts and Balance of Risks4
External Conditions2
Inflation and its Determinants3
-40
-30
-20
-10
0
10
20
30
40
20
00
20
02
20
05
20
08
20
10
20
13
20
16
-1
0
1
2
3
4
5
6
20
00
20
03
20
06
20
09
20
12
20
15
20
18
20
21
Evolution of GDP Growth ForecastsAnnual % change
Trade of Goods 1/
Annual % change, s. a.
Soruce: IMF, WEO spring 2012-2016. 1/ Refers to the sum of imports and exports.s. a. / Seasonally adjusted data.Source: CPB Netherlands.
World Economy
2015
Observed
March
8Quarterly Report January - March 2016
20132014
20122011
2016 Volume
Price
Value
The downward adjustment of the world economic growth expectations continued and worldtrade remained stagnated.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Quarterly Report January - March 2016
9
Consumer Price Index and Personal Consumption Expenditures Deflator
Annual % change, s. a.
Real GDP and ComponentsQuarterly % change at annual rates, and contributions in percentage points, s. a.
Change in Non-farm Payrolls and Unemployment Rate
Thousands of jobs and % of EAP, s. a.
s. a. / Seasonally adjusted data.Source: U.S. Department of Commerce and Bureau of EconomicAnalysis (BEA).
s. a. / Seasonally adjusted data.Source: Bureau of Economic Analysis (BEA).
EAP/ Economically Active Population.s. a. / Seasonally adjusted data.Source: Bureau of Labor Statistics (BLS).
United States
2
3
4
5
6
7
8
9
10
11
-800
-600
-400
-200
0
200
400
600
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Change in non-farm payrolls
Unemployment rate
April-4
-2
0
2
4
6
8
20
10
20
11
20
12
20
13
20
14
20
15
20
16
GDP
Private Consumption
Fixed Investment
Inventories Net ExportsPublic Expenditure 1Q-2016
PCE: Headline
PCE: Core
March
CPI: Headline
April
In the U.S., inflation remained below its 2 percent target and GDP growth significantlydecelerated in 1Q 2016, while labor market conditions continued improving.
15
30
45
60
75
90
105
120
135
150
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
Mexican Oil Mix
WTI
Futures 1/
Crude Oil PricesUSD per barrel
Mexico: Terms of Trade3-month moving average
Index Oct-2014=100
1/ Data up to May 24, 2016.Source: Bloomberg.
Source: Calculated by Banco de México with data from SAT, Ministry of Economy, Bancode México, INEGI. México´s Goods Trade Balance. SNIEG. National Interest Information.
10Quarterly Report January - March 2016
40
50
60
70
80
90
100
110
120
130
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Total
Oil
Non-oil
March
After the drop registered during the first weeks of 2016, commodity prices recovered slightly,although they still remain at low levels. Thus, the terms of trade deteriorated in Mexico.
11
-90
-70
-50
-30
-10
10
30
50
70
90
110
1 4 7
10
13
16
19
22
25
28
31
34
37
40
43
46
49
52
Weeks
2008
2009
2012
2013
2014
2015
20112016
Accumulated Capital Flows (Debt and Equity) 1/
Billions of dollars
90
100
110
120
130
140
150
160
170
180
190
200
210
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Mar
-16
May
-16
Nominal Exchange Rate against USDIndex 01-Jan-2013 = 100
1/ The sample covers funds used for the buying-selling of stocks and bonds from emerging countries,recorded in advanced countries. Flows exclude portfolio performance and changes in the exchangerate.Source: Emerging Portfolio Fund Research.
Source: Bloomberg.
Korea
Chile
Colombia
South Africa
Brazil
Mexico
May
May, 18
Emerging Markets
Quarterly Report January - March 2016
These factors have generated higher exchange rate volatility and lower capital flows toemerging economies.
12Quarterly Report January - March 2016
Low world economic growth and stagnated global trade.
The Mexican economy is facing different challenges
Unstable international crude oil prices.
The normalization process of the U.S. monetary policy.
All of the above led to recurrent volatility episodes in international financialmarkets that passed through to Mexico’s local markets.
Outline
13Quarterly Report January - March 2016
Monetary Policy1
Forecasts and Balance of Risks4
External Conditions2
Inflation and its Determinants3
1
2
3
4
5
6
7
8
9
10
11
12
13
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Consumer Price IndexAnnual % change
Source: Banco de México and INEGI.
Headline
CoreVariability Interval
Non-Core
14
1F-May
Quarterly Report January - March 2016
Inflation performance has been favorable:
12 consecutive months below the permanent target.
A low pass-through of exchange rate fluctuations onto prices.
-2
-1
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Merchandise Services
Source: Banco de México and INEGI. Source: Banco de México and INEGI.
Core Price IndexAnnual % change
Services
Education (tuition)
Housing
Other services
Enero
15
0
1
2
3
4
5
6
7
8
9
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Merchandise
Durables
Non-durables
Quarterly Report January - March 2016
1F-May1F-May
Core inflation showed a moderate upward trend derived from the relative price adjustmentsbetween merchandise and services.
-15
-12
-9
-6
-3
0
3
6
9
12
15
18
21
24
27
30
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Agricultural Energy and Government Approved Fares
Source: Banco de México and INEGI. Source: Banco de México and INEGI.
Non-Core IndexAnnual % change
Enero
16
-3
0
3
6
9
12
15
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Fruits and vegetables
Livestock
Agricultural Energy and governmentapproved fares
Energy
Government approved fares
Quarterly Report January - March 2016
1F-May 1F-May
A more favorable evolution of energy prices since 2015 continued decreasing the contributionof non-core inflation to headline inflation.
-20
0
20
40
60
80
100
120
140
160
180
19
69
19
71
19
73
19
75
19
78
19
80
19
82
19
84
19
87
19
89
19
91
19
93
19
96
19
98
20
00
20
02
20
05
20
07
20
09
20
11
20
141.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Headline Inflation Expectations Median, %
Annualized Monthly Rate of Inflation 2/
%, s. a.
1/ Based on the methodology described in Box 1 “Decomposition of the Break-even Inflation” of the QuarterlyReport October-December 2013. For this report, the estimate was updated to include data up to December2015.Source: Banco de México.
s. a. / Seasonally adjusted data.2/ Technical Chapter from the Inflation Report October - December 2010: Change in the Nominal System ofthe Mexican Economy in the early 2000’s. It is shown that from October 2001 inflation began a stationaryprocess [I(0)]. Source: Banco de México.
April
17Quarterly Report January - March 2016
Next 4 years
Variability interval
End of 2016
End of 2017
Long-term (Market Instruments) 1/
April
Adoption of the Inflation Targeting
Regime
Inflation expectations implicit in long-term market instruments remain stable, while survey-basedexpectations kept decreasing, in a context in which the level, volatility and persistence of inflationhave diminished since various years ago.
4
6
8
10
12
14
16
18
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Quarterly Report January - March 2016
18
Exchange Rate 1/
Pesos per USDImplied Volatility in Exchange Rate Options 2/
%
1/ Refers to FIX exchange rate. Data up to May 24th. The vertical black line refers to January 1st,while the dashed line indicates the February 17th.Source: Banco de México.
2/ Refers to implied volatility in one-month options. The vertical black line refers to January 1st,while the dashed line indicates the February 17th.Source: Bloomberg.
18.47
May May
The foreign exchange market kept functioning as the main absorber of external shocks.
Quarterly Report January - March 2016
19
Government Securities’ Holdings by Foreign Investors 1/
MXN billionInternational Reserves
USD billion
1/ Total includes CETES, bonos, udibonos, bondes and bondes D.Source: Banco de México.
Source: Banco de México and International Monetary Fund.
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
0
500
1,000
1,500
2,000
2,500
Mill
ares
May
Total
Bonds
CETES
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20-May
International reserves
IMF’s Flexible Credit Line
Non-resident government securities’ holdings reduced slightly.
20
Headline Inflation and Nominal Depreciation RateAnnual % change
Source: Banco de México and NEGI.
-50
0
50
100
150
200
250
300
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
20
11
20
14
April
Headline Inflation
FX Depreciation
Quarterly Report January - March 2016
20
16
Unlike in the past, recent exchange rate fluctuations have not affected the price formationprocess of the economy. Thus, inflation has stayed below the permanent target over the last 12months, despite the exchange rate performance.
2
3
4
5
6
7
8
9
10
11
12
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
1 day
10 years
30 years
1 year
3 months
Government Securities’ Interest Rates 1/
%Government Bond Yield Curve
%
1/ Since January 21, 2008, the one-day (overnight) interest rate corresponds to the target for theOvernight Interbank Interest Rate.Source: Banco de México and Proveedor Integral de Precios (PiP). Source: Banco de México and Proveedor Integral de Precios (PiP).
2 years
21Quarterly Report January - March 2016
May2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
1 1 3 6 1 2 3 5 10 20 30
months yearsday
31-Mar-16
24-May-16
30-Sep-15
31-Dec-15
Short-term interest rates in Mexico reflected the increments in the reference interest rate that resultedfrom the monetary policy actions. In contrast and congruent with the anchoring of long-term inflationexpectations, long-term interest rates remained relatively stable.
0.2 0.5
-0.1
-1.9
-3.9
-1.0
2.1
1.7
1.3 1.4
0.9
0.8 1
.00
.91
.50
.8 0.8
1.5
0.3
0.9
0.5
-1.0
1.2
0.4 0.5
0.8
0.5 0
.70
.5 0.6 0
.80
.5 0.8
-5
-4
-3
-2
-1
0
1
2
3
4
I 200
8
III 2
008
I 200
9
III 2
009
I 201
0
III 2
010
I 201
1
III 2
011
I 201
2
III 2
012
I 201
3
III 2
013
I 201
4
III 2
014
I 201
5
III 2
015
I 201
6
Gross Domestic ProductQuarterly % change, s. a.
Global Indicator of Economic ActivityIndex 2008=100, s. a.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
1Q 201680
90
100
110
120
130
140
150
90
95
100
105
110
115
120
125
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
22Quarterly Report January - March 2016
March
Services
Total
Industrial
Agricultural
In 1Q 2016, the growth of the Mexican economy was greater than in the previous quarter.
80
90
100
110
120
130
140
150
90
95
100
105
110
115
120
125
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
23
Revenues of Commercial Retail Businessand Total ANTAD SalesIndex 2008= 100, s. a.
Workers’ RemittancesBillion, constant USD and MXN 2/, s. a
AprilMarch
ANTAD 1/
Revenues of Commercial
Retail Business
s. a./ Seasonally adjusted data.
2/ Prices as of the second fortnight of December 2010.
Source: Banco de México.
s. a./ Seasonally adjusted data.
1/ It refers to total sales.
Source: INEGI and elaborated by Banco de México with data from ANTAD.
12
17
22
27
32
37
42
1.6
1.8
2.0
2.2
2.4
2.6
2.8
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
March
USD
Pesos
Domestic Light Vehicle Retail SalesThousands of units, annualized, s. a.
s. a./ Seasonally adjusted data.
Source: Prepared by Banco de México with data from the Mexican
Automotive Industry Association (AMIA).
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
April
Quarterly Report January - March 2016
Most private consumption indicators suggest that it continued registering a favorabletrajectory in 1Q 2016.
Quarterly Report January - March 2016
24
85
90
95
100
105
110
115
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
IMSS-Insured Jobs, Employed Population and Total IGAE Index 2012=100, s. a.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
March
National Unemployment Rate % of EAP, s. a.
s. a. / Seasonally adjusted data.1/ Permanent and temporary workers in urban areas. Seasonally adjusted by Banco de México.Source: Calculated by Banco de México with data from IMSS and INEGI (SCNM and ENOE).
EAP/ Economically active population.s. a. / Seasonally adjusted data.Source: National Employment Survey (Encuesta Nacional de Ocupación y Empleo), INEGI.
AprilMarch
1Q-2016
IMSS-affiliated Jobs 1/
Employedpopulation
Total IGAE
Although most labor market indicators showed an improvement, certain slack conditionsstill prevail.
Quarterly Report January - March 2016
25
70
75
80
85
90
95
100
105
110
115
60
80
100
120
140
160
180
200
220
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Total
Investment and its ComponentsIndex 2008=100, s. a.
80
85
90
95
100
105
110
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Investment in Residential andNon-residential Construction
Index 2008=100, s. a.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
s. a. / Seasonally adjusted data.Source: Mexico’s System of National Accounts, INEGI.
February
National machinery and equipment
Construcción
Imported machinery and equipment
Non-residential
Residential
February
Gross fixed investment continued showing a weak performance, although at the marginthere was a rebound in construction.
10
30
50
70
90
110
130
150
170
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Oil and Non-oil ExportsIndex 2008=100, s. a.
50
70
90
110
130
150
170
190
210
230
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Manufacturing ExportsIndex 2008=100, s. a.
s. a. / Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG. NationalInterest Information, and Banco de México with data from PMI Comercio Internacional. S.A. de C.V.
s. a. / Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG. NationalInterest Information.
April
Total
Non-automotive
Automotive
Total exports
Non-oil exports
Oil exports
April
26Quarterly Report January - March 2016
External demand continued exhibiting an unfavorable performance. Hence, bothmanufacturing and crude oil exports kept showing a negative trend.
27
OECD Countries ExportsAnnual % change
Source: Organization for Economic Cooperation and Development (OECD).Quarterly Report
January - March 2016
Australia -1.3 -2.9 -2.8 1.3 1.1 -4.1 -3.8 -12.5 -20.1 -23.3 -22.0 -21.6 Austria 1.8 3.8 4.5 8.1 6.0 7.6 1.0 -6.0 -15.4 -19.2 -12.7 -10.1 Belgium 0.1 2.5 9.4 9.6 4.2 7.3 1.2 -9.1 -17.3 -17.3 -16.6 -10.3 Canada -0.1 0.7 0.7 0.9 -1.5 5.3 8.9 2.4 -8.0 -14.0 -15.7 -16.8 Chile -4.9 1.5 5.8 -7.9 2.5 -2.0 -3.5 -4.5 -10.7 -19.0 -19.3 -19.2 Czech Republic -4.1 1.0 5.5 10.4 13.8 13.6 5.6 -1.3 -12.3 -13.1 -7.8 -4.4 Denmark 2.0 0.0 7.7 6.6 4.4 7.4 -0.6 -8.6 -12.8 -16.9 -16.3 -12.0 Estonia 4.4 5.2 -4.8 1.8 -4.4 0.7 3.0 -5.1 -18.7 -20.1 -21.9 -17.9 Finland -2.4 -0.5 1.5 6.9 0.4 7.7 1.3 -9.3 -19.5 -21.7 -20.4 -17.0 France -0.5 2.0 2.5 4.6 2.0 3.6 0.1 -5.7 -14.8 -14.1 -12.5 -10.3 Germany -0.0 0.8 3.9 7.1 5.4 7.6 4.4 -3.3 -11.6 -12.9 -11.1 -9.7 Greece 8.6 7.8 9.0 -9.8 2.3 -0.9 -4.0 -1.5 -20.9 -19.9 -24.3 -18.5 Hungary -0.3 1.9 5.4 10.8 8.7 9.6 3.8 -5.6 -11.3 -13.3 -11.1 -6.4 Iceland -0.7 -4.9 4.6 0.3 -2.6 1.1 5.0 0.4 3.0 7.3 -17.6 -13.5 Ireland -7.3 0.3 -1.0 6.3 5.2 8.5 4.4 1.5 -0.1 -0.9 0.3 2.7Israel 5.5 5.6 -3.2 14.0 8.6 -3.6 9.3 -8.3 -8.5 -5.9 -12.0 -2.2 Italy 1.1 1.5 4.6 5.0 5.1 6.8 1.7 -5.2 -14.2 -15.9 -14.0 -10.2 Japan -12.4 -12.9 -10.4 -5.6 -4.1 -2.7 -1.7 -5.5 -5.1 -9.7 -12.5 -10.5 Korea -0.3 1.3 3.1 4.3 1.2 3.5 3.7 0.7 -3.0 -7.1 -9.5 -12.0 Luxembourg -18.1 -2.2 6.9 9.8 12.8 8.6 5.2 -8.8 -13.5 -9.8 -12.3 -6.8 Mexico 0.4 2.0 4.5 2.6 3.1 5.9 4.4 5.0 -0.6 -4.2 -4.0 -6.7 Netherlands 2.0 -0.1 5.1 2.8 1.5 6.3 1.0 -7.2 -17.1 -17.3 -15.6 -13.0 New Zealand 3.2 1.1 0.5 16.9 18.3 15.9 2.9 -11.4 -19.3 -17.8 -17.0 -16.4 Norway -8.9 -3.9 2.2 -0.6 2.0 -4.8 -9.1 -17.0 -30.1 -25.0 -25.0 -27.2 Poland 7.4 10.3 12.5 11.9 13.3 13.8 3.7 -0.5 -11.0 -12.8 -9.8 -5.8 Portugal 2.5 7.7 10.8 11.3 5.2 5.0 1.5 -4.4 -13.5 -14.9 -14.0 -11.5 Slovak Republic 4.7 5.1 5.6 9.9 9.8 5.3 0.7 -9.8 -16.2 -16.9 -11.8 -6.5 Slovenia 3.0 2.1 7.7 9.6 8.3 9.0 5.9 -2.2 -12.2 -13.7 -12.6 -8.5 Spain 7.3 8.7 8.6 4.9 3.4 6.2 3.0 -4.7 -13.0 -15.6 -13.8 -8.7 Sweden -4.3 -3.7 -3.0 -0.5 1.2 2.3 -2.0 -8.3 -18.7 -16.3 -15.1 -8.5 Switzerland -2.0 2.3 2.8 2.8 9.6 6.8 5.1 -1.4 -7.7 -9.1 -9.6 -2.7 Turkey 5.5 -2.3 -5.4 0.2 7.0 5.0 3.0 -0.3 -7.7 -8.9 -11.9 -6.9 United Kingdom -2.9 4.0 -1.8 1.8 5.0 1.4 0.7 -3.7 -12.1 -7.1 -9.9 -9.6 United States 1.6 1.0 1.5 4.3 2.1 3.5 4.3 0.8 -4.5 -5.8 -7.9 -10.3
Total OCDE -0.6 0.4 2.1 4.0 3.3 4.7 2.4 -3.5 -10.7 -12.1 -11.9 -10.5
2015-IV2013-I 2013-II 2013-III 2013-IV 2014-I 2014-II 2014-III 2014-IV 2015-I 2015-II 2015-III
This occurred in a context of a widespread decrease in export activity in the main worldeconomies.
Quarterly Report January - March 2016
28
Imports by Type of GoodIndex 2008=100, s. a.
Trade BalanceMillions of dollars
s. a./ Seasonally adjusted data.Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG.National Interest Information.
Source: SAT, Ministry of Economy, Banco de México, INEGI. México´s Goods Trade Balance. SNIEG.National Interest Information.
50
70
90
110
130
150
170
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
Consumption goods
Capital goods
April
Intermediate goods
-10,000
-8,000
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
1Q 2016
Total
Oil
Non-Oil
In an environment of weak global trade, imports in Mexico stagnated and the trade balancedeficit increased, mainly as a consequence of the crude oil trade balance performance.
-10
-8
-6
-4
-2
0
2
4
6
82
00
6
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
29
Output Gap 1/
% of potential output, s. a.
s. a. / Calculated with seasonally adjusted data.1/ Estimated using the Hodrick-Prescott (HP) filter with tail correction method; see Banco de México (2009), “Inflation Report April–June 2009”,p.69.The shaded area is the 95%confidence interval of the output gap, calculated with an unobserved components method.Source: Calculated by Banco de México with data from INEGI.
GDP
IGAE
March1Q-2016
Quarterly Report January - March 2016
Thus, so far in 2016 slack conditions, even though decreasing, have prevailed in the economy.
Outline
30Quarterly Report January - March 2016
Monetary Policy1
Forecasts and Balance of Risks4
External Conditions2
Inflation and its Determinants3
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Quarterly Report January - March 2016
31
Fan Chart: Output Gap% of potential output, s. a.
s. a./ Seasonally adjusted data.Source: Banco de México.
GDP Growth(%)
Report Previous Current
2016 2.0 – 3.0 2.0 – 3.0
2017 2.5 – 3.5 2.3 – 3.3
Increase in the number of IMSS-insured jobs(Thousands)
Report Previous Current
2016 610 – 710 590 – 690
2017 650 – 750 630 – 730
Economic Activity Outlook
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2015Q4
2016 Q4
2017Q4
Current Account Deficit(% of GDP)
Report Previous Current
2016 2.9 3.1
2017 2.9 3.1
The possibility of a more pronounced slowdown of the world economic growth and, in particular, of the U.S.industrial activity.
That, in light of a more complex international environment, financing conditions would become tighter, whichcould affect investment plans.
A greater dynamism of private consumption over the next quarters.
Risks to the Growth Outlook
Downward
Upward
32Quarterly Report January - March 2016
That the implementation of structural reforms would produce more favorable and faster effects thananticipated by the market.
Inflation Outlook
33Quarterly Report January - March 2016
Core inflation
20
16
That over the next months it will remain under3 percent and in the last months of the year itwill temporarily exceed this figure. For the yearas a whole, average annual inflation isexpected to lie practically at 3 percent.
Headline inflation
20
17
That they will persist around the permanent inflation target.
That it will gradually increase in annual terms,concluding 2016 at levels close to 3 percent.
Annual Headline Inflation 1/
%Annual Core Inflation 2/
%
1/ Quarterly average of annual headline inflation.Source: INEGI and Banco de México.
2/ Quarterly average of annual core inflation.Source: INEGI and Banco de México.
Fan Charts
2015 Q4
2017 Q4
2016 Q4
2015 Q4
2017 Q4
2016 Q4
2006 2007 2009 2011 2013 2015 2016 2017
34Quarterly Report January - March 2016
2006 2007 2009 2011 2013 2015 2016 2017
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline Inflation Target
Variability Interval
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
Observed
Headline Inflation Target
Variability Interval
Inflationary conditions in the economy are anticipated to remain favorable, so that inflationwill continue fluctuating around its permanent target.
Downward Upward
That the international environment willdeteriorate, thus leading to a disorderlydepreciation of the exchange rate.
35
That as a result of structural reforms, drops inthe prices of some generalized-use inputs willcontinue, such as telecommunication servicesand energy prices.
Quarterly Report January - March 2016
Risks to Inflation Outlook
That Mexican and global economic activity willhave a lower than expected dynamism.
Increments in agricultural products’ prices cannotbe ruled out, although their impact on inflationwould tend to be transitory.
Quarterly Report January - March 2016
36
Monetary Policy Stance
Considering the facts presented in this Report, the Board of Governors will closely monitor theevolution of all inflation determinants and its medium- and long-term expectations, especially:
The exchange rate and its possible pass-through onto consumer prices.
The monetary stance of Mexico relative to that of the U.S.
The evolution of the output gap.
→ All this, in order to be able to take the necessary measures in a flexible manner and whenever conditionsdemand it, so as to consolidate the efficient convergence of inflation to its 3 percent target.
Quarterly Report January - March 2016
37
Strengthening Confidence in the Mexican Economy
In the future, Mexico will be facing an adverse external environment that will represent athreat to economic growth and possible pressures on inflation.
In this context, it is crucial to preserve the macroeconomic strength, adjusting in a timelymanner the monetary and fiscal stances.
Likewise, it is necessary to continue encouraging domestic sources of growth, so that notonly the sluggishness of global demand is offset, but also so that higher economic growthrates are achieved in a sustained manner. The efficient implementation of structural reformsis of utmost importance.