Economics: Indicators confirm worsening in key economic sectors
Economic news published in June confirmed expectations of a rapidly deteriorating economic situation. Although the Mexican economy had already been suffering negative results for several months, beginning in the second half of March that downtrend was aggravated by the Covid-19 effect, with readings of private expenditure and gross fixed capital formation accelerating their fall.
The leading index of economic activity for April offered an initial indication of worsening readings, recording its sharpest fall since November 2008. At the same time industrial activity plunged by roughly 30%, led sharply lower by construction and manufacturing, which saw its transport equipment component plunge by 86%. That last number is likely to be at least similarly pronounced in the report for May as preliminary results from the automotive industry already show the number of vehicles rolling off assembly lines or being exported plunging by around 95%, and domestic vehicle sales considerably less than half their levels of May 2019. Aggregate demand fell 2.7% during the first quarter, and we project that the contraction will be seven times greater during the second quarter.
An Inegi telephone survey for April hinted at the labor market carnage to come as it indicated that 12.5 million people had entirely left the labor market, with redundancies and the loss of informal sector income taking an especially hard toll on those in the lowest income brackets. These developments point to the likelihood of unprecedented pressure on the labor market in the coming months.
According to the International Monetary Fund’s most recent economic estimates, the Mexican economy will fall 10.5% this year and is only expected to recover about a third of that amount in 2021, the worst two-year outlook of any country in a 30-country sample of IMF member states.
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