Economics: Aggregate demand figures show 2Q deepening of deceleration amid weakened private consumption of services, public investment

MEXICO - Report 24 Sep 2024 by Mauricio González and Francisco González

Last Wednesday, Inegi published aggregate supply and demand figures for the second quarter of 2024, showing an increase in demand (equal to supply) of 0.9% at a seasonally adjusted annual rate. That marked a deceleration with respect to the increases reported for the first quarter (2.4% yoy), and especially for full-year 2023 (3.7%).

Private consumption, the component with the greatest impact on demand, increased 2.7% in the quarter, down from the 5.0% rise in 2023. Within this component, consumption of domestic goods has been stagnating while there had previously been a considerable increase in the consumption of imported goods. However, in recent months the latter has also begun to decelerate due to the weakening of the exchange rate. Likewise, household spending on services has decelerated significantly, so that for the second half of the year, total private consumption is expected to weaken even more than it has so far.

Gross fixed investment figures for June showed a contraction in construction caused by the fall in public investment in civil engineering works. Given the high base of comparison, this construction item is expected to represent a brake on growth for the remainder of 2024 and for the following year.

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