1 / 53

U.S.-Mexico Economic Update: Where are we headed?

U.S.-Mexico Economic Update: Where are we headed?. Roberto Coronado Assistant Vice President in Charge and Sr . Economist May 17, 2013. The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions

kin
Download Presentation

U.S.-Mexico Economic Update: Where are we headed?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. U.S.-Mexico Economic Update: Where are we headed? Roberto Coronado Assistant Vice President in Charge and Sr. Economist May 17, 2013 The views expressed in this presentation are strictly those of the author and do not necessarily reflect the positions of the Federal Reserve Bank of Dallas or of the Federal Reserve System. Any secondary distribution of this material is strictly prohibited. May be quoted with appropriate attribution to the author.

  2. Today’s agenda • U.S. economic update • Mexico’s economic update • Trade between the U.S. and Mexico • Texas-Mexico border economy in transition • Future of manufacturing in Mexico • Concluding remarks

  3. U.S. recovery continues to be modest

  4. What do we mean by a sluggish recovery?

  5. GDP growth: two steps forward, one step backward

  6. Payroll employment continues to improve

  7. Unemployment rate is coming down

  8. U.S. manufacturing recovery gaining momentum

  9. Is manufacturing picking up?

  10. Vehicle sales continue to improve

  11. What about the rest of the economy • Housing has bottomed down. Recovery gaining momentum. • Consumer spending has picked up. However, consumer sentiment still low. • Inflation in the comfort zone. • The big elephant in the room: Uncertainty

  12. Mexico’s recovery has moderated

  13. Mexico’s economy is moderating

  14. Expansion isbroad-based

  15. What is driving the strong recovery? • External sector • Mexicotappedintothestronggrowth of emergingeconomies, around 20% of itsexportsgoto EM • U.S exportshavealsogrown, specially autos • Internal sector • Formal employmentpostedstronggains • Healthybankingsystem • Jobs + Lending = Strongconsumption • Capital flows • FDI bouncing back afterthe “Great recession” • Portfolio investmenttakingthe lead

  16. Non-U.S. Mexico’s exports in the lead

  17. What is driving the strong recovery? • External sector • Mexicotappedintothestronggrowth of emergingeconomies, around 20% of itsexportsgoto EM • U.S exportshavealsogrown, specially autos • Internal sector • Formal employmentpostedstronggains • Healthybankingsystem • Jobs + Lending = Strongconsumption • Capital flows • FDI bouncing back afterthe “Great recession” • Portfolio investmenttakingthe lead

  18. Growth in Mexico’s formal employment

  19. Lending has returned to pre-crisis levels

  20. Retail sales

  21. What is driving the strong recovery? • External sector • Mexicotappedintothestronggrowth of emergingeconomies, around 20% of itsexportsgoto EM • U.S exportshavealsogrown, specially autos • Internal sector • Formal employmentpostedstronggains • Healthybankingsystem • Jobs + Lending = Strongconsumption • Capital flows • FDI bouncing back afterthe “Great recession” • Portfolio investmenttakingthe lead

  22. Capital inflows making a strong comeback: portfolio investment taking the lead

  23. Outlook for the Mexican economy

  24. Trade is the main catalyst for U.S.-Mexico economic integration

  25. World trade now exceeds pre-crisis peak… Title in here

  26. …but still below 1992-2007 trend Title in here

  27. U.S.-Mexico trade Source: Census Bureau/Haver Analytics

  28. U.S.-Mexico trade Source: Census Bureau/Haver Analytics

  29. U.S.-Mexico trade • Mexico is the third most important trading partner for the U.S. • In 2012, Total trade with Canada almost reached $616 billion, with China $536 and with Mexico $493 • For Arizona, California, New Mexico and Texas, Mexico is a key trading partner: • Arizona ---- $6.3 billion (34%) • California ---- $26.3 billion (16%) • New Mexico ---- $0.6 billion (21%) • Texas ---- $94.8 billion (36%)

  30. How are the U.S.—Mexican industrial sectors linked? • 18% of U.S. exports go to Mexico • 72% of U.S. exports to Mexico are industrial products • 8% of U.S. imports are from Mexico • 90% of these imports are industrial • Maquiladoras are a major vehicle for this cross-border movement of industrial goods

  31. U.S.-Mexico total tradeby sector Source: U.S. Census Bureau

  32. Trade by port of entry Source: U.S. Department of Commerce Bureau of the Census, Foreign Trade Division

  33. Texas–Mexico border synchronization Mc Allen-Reynosa El Paso-Ciudad Juarez Laredo-Nuevo Laredo Brownsville-Matamoros Notes: Charts show nonfarm employment annual growth rates (left-axis) for U.S. border cities and maquiladora value-added annual growth rates (right-axis) for Mexican border cities, for the period 2000-2006. Sources: U.S. Bureau of Labor Statistics and InstitutoNacional de EstadisticaGeografia e Informatica.

  34. PiedrasNegras- Eagle Pass Notes: Charts show nonfarm employment annual growth rates (left-axis) for U.S. border cities and maquiladora value-added annual growth rates (right-axis) for Mexican border cities, for the period 2000-2006. Sources: U.S. Bureau of Labor Statistics and InstitutoNacional de EstadisticaGeografia e Informatica.

  35. Maquiladoras impact by border city • 10 percent increase in maquiladora output leads to an increase in the adjacent U.S. city as follows: • 2.8 percent increase in total employment in El Paso • 4.6 percent increase in total employment in Laredo • 2.2 percent increase in total employment in Brownsville • 6.6 percent increase in total employment in McAllen • 3.9 percent increase in total employment in Eagle Pass

  36. Maquiladoras are quite important for Texas border cities Title in here

  37. Texas-Mexico border economy in transition

  38. Border economy in transition Source: Bureau of Economic Analysis Employment migrating from manufacturing to services Per capita income closing gap with national levels

  39. Per capita income in El Paso and other Texas border cities, 1969-2010(As a share of the US level)

  40. Percentage-point contribution to border-city earnings growth by selected industries, 2001-2010 Source: CrossroadsIssue 2: July 2012; Federal Reserve Bank of Dallas, El Paso Branch

  41. Future of manufacturing in Mexico

  42. Future of Mexico’s manufacturing • Mexico has undergone a severe transformation in manufacturing and exports since 2001. • Today, Mexico is a key player in global manufacturing. • However, there are plenty of challenges ahead.

  43. China’s manufacturing wages are growing faster than Mexico, but… Index, 2002=100 Source: Bureau of Labor Statistics and author’s calculations

  44. Mexico’s manufacturing compensation still higher than China $/hour Source: Bureau of Labor Statistics and author’s calculations

  45. But manufacturing productivity is growing in Mexico Source: INEGI and author’s calculations

  46. Mexico auto exports

  47. Mexico gains ground in North America light vehicle production Source: Thomas H. Klier, Federal Reserve Bank of Chicago, with data from Ward’s Automotive Group.

  48. Mexico becomes largest source country of U.S. motor vehicle parts Mexico Source: Thomas H. Klier, Federal Reserve Bank of Chicago, with data from International Trade Commission.

  49. Mexico is closing the gap with China Source: U.S. Census Bureau 2013* Year to date

  50. Exchange rate

More Related