Composition of Mexico Q4 14 GDP growth will be crucial for the 2015 outlook: Societe Generale

Quotes from Societe Generale:

- On the back of a jump in vehicle exports, Mexico's real export growth surged impressively during the period 2010-14. The improvement in the competitiveness of exports - and, therefore, stronger investment growth - was achieved by means of lower wage growth amid a weak labour market. 

- However, the decline in real wages of nearly 25% since 2007 has been the main factor behind the low growth in consumption. As a result, there exists a trade off between consumption and export growth. The recent improvement in the labour market has less to do with the stronger growth and more to do with a cyclical bottoming out of labour force growth. 

- However, Mexico's experience suggests that labour market tightening might not lead to a strong pick up in wages (at least in short-to-medium term). This implies that the economy remains dependent on investment and exports, and the composition of Q4 14 GDP growth will be crucial for the 2015 outlook.