Itaú BBA - MEXICO – Activity recovery continued in October

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MEXICO – Activity recovery continued in October

December 23, 2020

Monthly GDP continued recovering on a sequential basis.

The IGAE fell on a year-over-year basis in October, but at a slower pace than previous months. The monthly GDP proxy (IGAE) fell by 5.3% year-over-year in October (from -5.4% in September), better than our forecast of -6.2%, but slightly worse than market expectations (-5.0% as per Bloomberg). According to calendar-adjusted figures, monthly GDP contracted 4.8%, taking the annual quarterly rate to -6.5% in October (from -8.2% in 3Q20). Looking at the breakdown, most of the sectors are contracting by less than 3Q20. The annual quarterly rate of the industrial sector improved to a contraction of 6.0% (from -8.8% in 3Q20), with construction falling 13.1% (from -17.8%) and manufacturing dropping 4.4% (from -7.1%). Services fell 7.3% yoy (from -8.6%), while the primary sector expanded 6.9% yoy in the quarter ended in October, down from 9.1% yoy in 3Q20.   
Monthly GDP continued recovering on a sequential basis. Using seasonally adjusted figures, monthly GDP rose 1.6% mom in October, up from 1.2% in September. Thus, qoq/saar reading reached 44.0% from 60.2% in September. The expansion in monthly GDP in October was driven by industry (2.0%), lifted by construction. Meanwhile services sector expanded 0.7%, led by retail sales (4.4% mom/sa), offset by a drop in transport, financial services and a deceleration in recreation.    
We forecast a 9.0% GDP drop this year. However, the implementation of new social distancing measures due to the acceleration of COVID-19 cases introduces downside risks to our projection.   

Julio Ruiz



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