Inflation and interest rate hikes will curb consumption in 2023 – El Sol de México

He Mexican consumption could decrease in this first quarter of the year as long as inflation does not subside down and Bank of Mexico (Banxico) continue raising the reference rate.

According to analysts consulted by The Sun of Mexicowhen the central bank raises the reference rate, loans for both individuals and companies are make more expensive affecting consumption and investment which are the main engines of the mexican economy.

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“Consumption is going to drop and there will be less demand for some products; The objective of raising interest rates by Banxico is to somewhat discourage consumption and that this expense be carried out for another day,” he explained. Jorge Gordillodirector of economic and stock market analysis at CIBanco.

For Ignacio Martinez, director of the Laboratory of Analysis in Trade Economy and Business (LACEN), the increases in the reference rate mainly affect 38.3 million people, that is, 66.23 percent of the population. Economically active population who receive between one and two minimum wages.

In the first month of 2023, inflation accelerated 7.91 percentthe highest level since October 2022, which led to the Governing Board of Banxico to unanimously raise the reference rate by 50 basis points to place it at a historic 11 percent. This increase occurs precisely to contain the rise in prices, but up to now it has not been reflected in the pockets of Mexican families.

Before knowing this information, the perception of the mexicans remained with some optimism, since the Consumer Confidence Indicator it stood at 44.2 points during January 2023, which meant an improvement of 1.2 points compared to the same month in 2022. However, this level is below 2019, the year before the pandemic, when it stood at 45.6 points.

inside this indicatoris the one that reflects the perception of the mexicans about the chances of buying a new or used car in the next two yearsand in January 2023 it stood at 13.7 points, an improvement of three points compared to January 2022.

On the question of whether they are planning to buy, build or remodel a house in the next two years, the indicator stood at 18.5 points, also an improvement of 2.3 points, compared to January 2022. The perception both in the purchase of a car and that of acquiring or remodeling a house were located above the levels prepandemiain accordance with Inegi.

The credits were already high

Ricardo Aguilar, economist in chief of Invex considered that all bank loans that are directly linked to the Equilibrium Interbank Interest Rate (TIIE) are the ones that will have the greatest impact.

“It has been observed that loans linked to the interest rate TIIE may be affected by this higher cost of credit and mainly in the business sector. He alza of Banxico It impacts business loans because they have gone from four to 11 percent,” said Aguilar.

For him analyst of Invexinvestment will be more damaged, not so much by the increase in the Reference rate by the banco centralbut because of the lack of certainty in the policies of the government of Andres Manuel Lopez Obrador.

According to Business Confidence Index with seasonally adjusted data Inegiin January it stood at 49.8 points, which represented a reduction of 1.1 points, compared to January 2022.

The economist of Invex does not see an impact on bank credits with the increase in the interest rate by Banxicosince since last year the credits so much for autos as mortgage it was already above the reference rate.

“When the interest rate was at four percent in July 2021, the interest rate interest especially cards credit had a risk component very highI have not seen that going from four to seven percent, the interest rates of credit cards have increased in a similar way.

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Ignacio Martinez, director of Laboratory of Analysis in Trade Economy and Business (LACEN) explained that businessmen make use of credit to expand their profits, but the rise in Banxico it will affect them pay more interest.

“When the interest rate rises, the profit margin is diminished, therefore, the companies They look for alternatives to cover the increase in the costs of financing”