Economics: July indicators confirm further slowdown as inflation spikes and public finances deteriorate
The preliminary estimate of 2QGDP showed the least pronounced increase in 13 quarters, just shy of 2.0%. The secondary sector provided only a little help by managing to grow half a percentage point as manufacturing numbers continued to reflect the softening of US demand for Mexican-made goods, extractive industries once again contracted, and the boom in construction dissipated further.
Despite the extent of consumer demand for imports, on the demand side private consumption further slowed its brisk pace. May’s result was almost a full percentage point off the average of the first five months of the year. Meanwhile, gross fixed investment sputtered in May to roughly half its stride of 5M24 and less than a quarter of its 3Q 2023 rate.
Regarding the consumer price index, despite the continuing softening of the core component, Banxico is unlikely to entertain an interest rate cut any time soon. In June, headline inflation rode another surge in fruit and vegetable prices, and non core inflation added almost another full point from May.
Public finances remained pressured through June, with the fiscal deficit growing a real-term 51% from the first half of 2023 even as Pemex’s financial situation deteriorated further. Falling sales and rising costs sent the company's positive bottom line of recent quarters into a 2Q 2024 quarter-billion peso loss.
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