T-MEC economies struggle to contain inflation – El Financiero

The rise in inflation is one of the main problems faced by the countries that make up the Treaty between Mexico, USA and Canada, (T-MEC), which is at its highest level in decades and countries face a number of obstacles in controlling it.

This, given the strong increase in the prices of energy and other raw materials, in addition to the disruptions in global supply chains, mainly.

Yesterday Canada reported that inflation in October stood at 4.7 percent per year, the highest figure since March 2003. In the same month in the United States it was at 6.2 percent per year, the highest since 1990.


“Inflation is likely to remain high in the coming months, as rising energy prices, supply disruptions and imbalances between supply and demand after the economy reopens continue to put pressure on prices,” said Michael Davenport, Canadian economist at Oxford Economics.

In Mexico, consumer prices reached an annual growth of 6.2 percent, also in October, and this was their higher figure since 2017, and the forecasts of some analysts suggest that it will close the year at 7.0 percent, at 2001 levels.

Carlos González, director of the financial group Monex, explained that due to the economic incentives to boost the economy, demand increased, but with the pandemic Consumption habits changed, which, together with the inventory process and factory closures, generated a disruption in the production chains and the energy crisis has resulted in a significant rise in prices.

“The high inflation is global because it is a consequence of the desynchronization caused by the pandemic. The costs of maritime freight, the prices of raw materials have risen and it has caused bottlenecks in the large logistics centers, ”said Gabriela Siller, director of economic and financial analysis at Banco Base.


Impact on recovery

The inflationary pressures they are exacerbated at the same time that the economic recovery is losing steam, raising concerns about the impact it may have on growth.

“Inflationary surprises raise further doubts about the ‘transitory’ increase, while recent data also points to short-term growth risks,” Barclays analysts said in a recent report.

After a collapse of more than 8 percent in GDP in Mexico during 2020, analysts predict that the Mexican economy will advance 6.0 percent this year, and will largely be driven by the dynamism of its northern neighbor.

“In a context of recession worldwide and with the incentives in the US, the national economy had a significant rebound. Currently the North American economy is at levels above those observed before the pandemic, while in Mexico, there is still no total recovery, but a large part of this improvement is due to exports and especially to external demand for manufactures ” , stated González.

Siller indicated that for the current growth rate, US exports should be advancing around 25 percent, but it is estimated that they will only grow 18 percent in the year. “For the US it represents a slowdown but for Mexico a brake on the recovery,” he said.

In the period of the trade agreement with North America, from 1994 to date, Mexico’s GDP reports an average growth of 1.9 percent, while in the US the figure is 2.3 percent and 2.2 percent in Canada. .

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