Mexico’s financial development slowed greater than anticipated within the second quarter of 2024. Based on preliminary knowledge from Mexico’s nationwide statistics institute, GDP grew by simply 0.2% in comparison with the earlier three months. This was the bottom forecast in a Bloomberg survey of economists.
From a 12 months in the past, GDP expanded by 2.2% within the quarter. This was additionally lower than the two.4% median projection. Mexico’s economic system is forecast to sluggish for a 3rd straight 12 months in 2024.
It’s anticipated to sluggish for a fourth 12 months in 2025. Nonetheless, elevated authorities spending earlier than the June nationwide elections helped help development. Agriculture fell 1.7% within the quarter after heavy droughts impacted manufacturing and costs.
Manufacturing and companies every managed small good points of 0.3%. “The weak point was fairly broad-based,” mentioned Kimberley Sperrfechter, an rising markets economist at Capital Economics. She sees exercise increasing 1.5% this 12 months, beneath the typical forecast of two% in a Bloomberg survey.
Mexico’s Q2 financial efficiency
Home demand had beforehand bolstered the economic system as shoppers continued to spend. Nonetheless, weak point within the US, Mexico’s largest buying and selling associate, affected exports.
The peso additionally confronted volatility and slid in worth after June’s election. Banco de Mexico held charges at 11% at its most up-to-date resolution in June. Economists are divided over whether or not it should minimize charges by 25 foundation factors in August or maintain till September.
Inflation has accelerated since March, though some central financial institution board members famous the drivers have been concentrated within the non-core part. “Development was somewhat underwhelming however not essentially a precursor to a recession,” mentioned Brendan McKenna, a strategist at Wells Fargo. “Mexico continues to be on tempo to develop round 2% this 12 months, so I don’t assume this will likely be a cloth enter into the subsequent charge resolution.”
Governor Victoria Rodriguez said that the board is open to ongoing rate-cut discussions.
In June, one board member voted for a quarter-point drop, suggesting that others may see the reason for a minimize. In a current Citi survey, economists forecast the vital charge will probably transfer in August and finish 2024 at 10.25%. Additionally they forecast development of 1.9% in 2024 and 1.5% in 2025, with inflation seen dropping to 4.4% by year-end.
“Board members have emphasised the nation’s financial weak point, so this knowledge helps our name for a 25bp minimize,” mentioned Gabriel Casillas, managing director at Barclays Capital Inc.