Mexico 2Q GDP data, surveys point to slower economy

: Coal, Crude oil, Metals
24/08/02

Private-sector analysts have lowered estimates for Mexico's 2024 and 2025 gross domestic product (GDP) growth while raising inflation forecasts for both years, the central bank said Thursday.

For a fourth consecutive month, the survey's median forecasts for GDP growth in 2024 declined, with analysts polled lowering growth estimates to 1.8pc for 2024 from 2pc in last month's survey. The 2025 growth forecast slipped to 1.61pc from 1.78pc.

The shift in forecasts arrives on the heels of preliminary second quarter GDP data, posted by statistics agency Inegi 30 July, showing the economy grew by an annual 2.2pc in the second quarter, up from 1.6pc in the first quarter but slowing from 3.5pc in the second quarter 2023.

The central bank's 2024 GDP estimate was lower than a 2.4pc estimate from Mexican bank Banorte.

Median projections for end-2024 inflation in the central bank's private-sector survey for July moved to 4.58pc from 4.23pc, with end-2025 projections rising to 3.83pc from 3.76pc in the June survey.

The central bank cited higher risks to inflation from a weakening peso and a potentially severe hurricane season in its latest monetary policy decision on 27 June when it held its target interest rate at 11pc. The peso weakened above 19 pesos to the US dollar Friday for the first time since January 2023, extending the losses triggered after 2 June elections that effectively erased congressional opposition to the progressive Morena party. It has weakened from 16.3 pesos to the dollar early April, its strongest level in more than eight years.

Growth in the industrial sector grew by an annual 1.9pc in the second quarter from 0.9pc in the first quarter, while services grew by 2.7pc in the second quarter from 2.1pc in the prior quarter, according to the latest GDP report. Agriculture contracted by 2.7pc in the second quarter from 0.6pc growth in the first quarter.

"The economy's exceptional momentum in previous years may be running out of steam," said Mexican bank Banorte in a note on the GDP report.

Banorte noted uncertainty in manufacturing, "although some of the early nearshoring-related investments could begin to result into more production. In addition, the auto sector remains strong, key to driving the category forward."

The downtrend is supported by comments from ratings agency Moody's out this week, predicting a "substantial slowdown" in the second half of 2024.

By James Young

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