Itaú BBA - MEXICO – Flash GDP rebounded in 3Q20

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MEXICO – Flash GDP rebounded in 3Q20

October 30, 2020

Activity recovery is driven mainly by the industrial sector

Mexico’s GDP preliminary estimate was above market expectations. The flash estimate of GDP growth for 3Q20, published by Mexico’s statistics institute (INEGI), came in at -8.6% year-over-year (from -18.7% in 2Q20), below our forecast of -8.0% and above market expectations of -8.9% (as per Bloomberg). According to calendar & seasonally-adjusted data reported by the statistics institute (INEGI), GDP in 3Q20 contracted at the same pace of the unadjusted series. Looking at the breakdown, also using calendar & seasonally-adjusted data, industrial sector stood at -8.9% in 3Q20 (from -25.7% in 2Q20), while services sectors fell by 8.8% (from -16.2%).

At the margin, industrial output led the recovery in 3Q20. Using seasonally adjusted figures, GDP gained 12.0% quarter-over-quarter in 3Q20 (from -17.1% in 2Q20). The quarterly figure implies the monthly GDP proxy for September continued recovering, but at a slower pace (0.9% month-over-month, from 1.1% in August).  Looking at the breakdown, industrial output expanded 22.0% quarter-over-quarter, while services sector grew at a slower pace (8.6%).



These figures imply upside risks to our GDP forecast for 2020 of -10.7%. We expect the economy to recover during the rest of the year, helped by manufacturing output (supported by the U.S. recovery and a weaker peso).  On the other hand, prevailing uncertainties over domestic micro policies and a modest fiscal stimulus will likely curb internal demand growth. A more gradual than-expected reopening of the economy, due to the resurgence of the outbreak, is also a downside risk to the recovery (recently a state returned to a maximum alert, restricting non-essential activities).

Julio Ruiz



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