Economics: Data in June shows internal market as main growth catalyst, with inflation and exports subsiding
As the internal market has emerged as the economy’s main growth driver, last week saw the release of Mexico’s monthly GDP proxy (IGAE) for April showing that economic activity has sustained a steady pace so far this year, growing a seasonally adjusted 3.3% during the month, in line with its average year to date. The report confirmed a similarly constant rate of growth in services of around 4% and a firming of manufacturing following some weaker reports earlier in the year, while construction activity contracted anew.
Those results were in keeping with the tenor of economic data published over the course of June, but while many were positive, many areas of activity are continuing to slow. The expansion of industrial activity reported for the first four months of the year reflected continuing albeit waning strength in a few of the weightiest manufacturing branches, while 60% of branches slowed for a second month. And although manufacturing performed better in April, all other industrial components turned in weaker numbers than in past months.
After private consumption increased 4.5% in the first quarter, retail sales revenues rose an annual 4.6% in April even as many retailers reported sales fell in May. Looking further ahead, fixed capital formation sustained its uptrend by growing 8.8% in March 2023 in response to another significant expansion of expenditure in imported machinery and equipment.
Inflation continued to cool thanks to an easing of both core and non core pressures as the headline rate flagged to 5.18% in the first half of June, clearing the way for Banxico to extend its rate pause.
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