Economics: April-May indicators confirm slowing as non automotive manufacturing and exports take another hit
The most recent reading of Mexico’s monthly GDP proxy (IGAE) show a clear deceleration for April-May 2024, in which the annual growth rate slowed to 1.2% following expansions of 2.3% in the first quarter and 3.2% for full-year 2023. Under the impact of the deep drought that ravaged major agricultural producing regions last year and the first months of this one, the agricultural sector contracted an annual 2.6% in April-May. We are also witnessing a further loss of momentum in the construction sector following the unusually high growth levels reported in 2023, especially in the second half of that year. After stagnating in both the first quarter of 2024 and the second half of 2023, manufacturing contracted 2.0% yoy in April-May in response to weaker demand for exports given the negative trend in US industrial production that extended up to May, and a drop in consumption of domestic goods and investment spending on non-automotive machinery and equipment of domestic origin. Considering the recent performance of the economy and of some especially important sectors, we continue to look for GDP to grow 2.0% this year and a weak 1.3% the following year.
In indicators released just this past week, inflation surged to its highest reading in 27 consecutive fortnights, with non-core inflation surging to 10.64% in the first half of July in response to strong increases in fruit and vegetable and select energy prices. Core inflation continued to slow despite a rebound in services costs.
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