Itaú BBA - MEXICO – Domestic demand recovered in 3Q20

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MEXICO – Domestic demand recovered in 3Q20

December 18, 2020

Domestic demand recovered at a slower pace than the external demand

Domestic demand recovered at a slower pace than the external demand in 3Q20.  Aggregate supply and demand fell by 11.4% year-over-year, worse than our forecast of -9.6% and below median market expectations of -9.8% (as per Bloomberg) and up from 2Q20 growth rate of -21.6%. Aggregate supply and demand fell by at the same pace using calendar adjusted figures, with both imports of goods and services (-18.7%, from -29.7%) and GDP (-8.6%, from -18.7%) recovering. On the demand side, domestic demand fell by 12.0% year-over-year in 3Q20 (from -20.7% in 2Q20), while exports of goods and services recovered at a faster pace (-2.7%, from -30.5%).  Within domestic demand, final private demand recovered to -13.9% (from -24.2%), with private consumption and private gross fixed investment at -12.7% (from -21.0%) and -18.9% (from -37.0%), respectively. In turn, final public demand stood at -0.3% (from 0.1%), dragged by public gross fixed investment which fell by 12.5% (from -9.6%). 

​​​​​​At the margin, domestic demand also recovered in 3Q20. Using seasonally-adjusted figures, final domestic demand grew 10.9% quarter-over-quarter in 3Q20 (from -19.0% in 2Q20). Within domestic demand, final private demand expanded 13.1% (from -22.2%), with both private consumption and gross fixed investment improving to 10.7% (from -19.6%) and 25.6% (from -33.1%), respectively. In turn, public sector demand fell by 0.3% (from -1.8%). On the other hand, exports of goods & services grew at a solid 40.2% (from -29.7%).


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We expect GDP growth for 2020 and 2021 of -9.0% and 4.0%, respectively. The external demand is the main driver of the economic recovery, while a modest fiscal stimulus and prevailing uncertainties over domestic policy direction are likely to curb internal demand growth. A retightening of social distancing measures amid the recent sharp increase in the outbreak is a downside risk to our economic outlook.

Julio Ruiz



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