The industrial sector, congregated in secondary activity, reached a “technical recession” after the second consecutive quarterly contraction, according to experts from Pantheon Macroeconomics.
Mexico's real Gross Domestic Product (GDP) grew 1.93% year on year in the first quarter of 2024 in seasonally-adjusted terms, reported the National Institute of Statistics and Geography (INEGI).
Overall economic growth was the lowest since the last quarter of 2021 and the GDP completed six consecutive quarters of deceleration since the peak reached in the July-September 2022, when it expanded by 4.64% year on year.
INEGI's data took private sector specialists consulted by the Bank of Mexico (Banxico) by surprise, as they were expecting annual growth of 2.30%.
From London, the chief economist for Latin America at consultancy firm Pantheon Macroeconomics, Andrés Abadía, warned that total growth increased for the tenth consecutive quarter completed the sixth readout losing momentum compared to recent figures.
The expert highlighted the resilience of the services sector, which helped the overall economy. According to INEGI data, tertiary activities posted 2.4% growth in the first quarter of 2024. The figure was close to the Institute's timely estimate, released 20 days ago, of 2.5%.
The deputy director of economic research at the International Monetary Fund (IMF), Petya Koeva, noted in April that the rising minimum wages, remittance flows and the availability of cash subsidies were fueling domestic demand, particularly supporting the services sector.
Secondary activities were the second most dynamic sector, growing 1.5% year on year, with industry and manufacturing overperforming. Experts from Banco Base --Gabriela Siller-- and Monex --Janneth Quiroz-- warned that the peso significantly increased the cost of imported inputs required by the industrial production process, thus hampering the activity's dynamism.
The Mexican peso appreciated 3% against the dollar in the first quarter, impacting the competitiveness of Mexican exports.
Quarterly progress stagnates
INEGI's detailed data shows that the Mexican economy grew 0.3% in the first quarter of 2024, compared to the last quarter of last year, also in real terms and seasonally-adjusted.
The performance is in line with market expectations from a Banxico survey with private sector specialists, showing 0.33% growth.
Quarterly data indicates that tertiary activities --which include services-- showed the most resilience, growing 0.7% in the quarter. Quarterly growth for the sector had been 0.3% in October-December.
It was the second most dynamic quarterly performance for the sector's activities in the last four quarters, just below the 0.9% achieved in September-October 2023.
Secondary activities --including industry-- showed a new quarterly contraction, of 0.5%, the second sequential negative performance. According to the Pantheon Macroeconomics expert, this is a “technical recession” in the sector, which is significant in the context created by high expectations from the potential of nearshoring.
