Itaú BBA - MEXICO – Monthly GDP remained weak in January

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MEXICO – Monthly GDP remained weak in January

March 25, 2019

Manufacturing and services sectors grew at a below trend rate

Monthly GDP decelerated in the quarter ended in January, with manufacturing and services sectors growing at a below trend pace. Mexico’s monthly GDP proxy (IGAE) expanded 1.3% year-over-year in January (from 0.04% in December), in line with our forecast and above median market expectations (1.1%, as per Bloomberg) – taking the three month moving average (3mma) growth rate to 1.1% year-over-year in the quarter ended in January (from 1.6% in December). Using calendar adjusted figures, published by the statistics institute (INEGI), the 3mma growth rate was similar (which is a deceleration from 1.3% year-over-year in December). Looking at the breakdown, the industrial sector was the main drag to economic activity, falling by 1.5% year-over-year in the quarter ended in January (from -1.2% in December), with mining decreasing (-9.0%, from -7.3%) due to the fall in oil output and the manufacturing sector improving slightly (1.1%, from 1.0%), but expanding at a below trend pace. In turn, primary sector accelerated to 4.7% year-over-year in the quarter ended in January (from 3.2% in December), while services sector grew at a soft pace (2.1%, from 2.4% in December). GDP excluding primary sector and mining output decelerated to 1.1% year-over-year in the quarter ended in January (from 1.3% in December), also adjusted by calendar effects.

At the margin, GDP excluding primary and mining sectors kept contracting, dragged by manufacturing and services sectors. Using seasonally-adjusted figures, monthly GDP grew 0.2% month-over-month in January (from -0.4% in December), taking the quarter-over-quarter annualized growth (qoq/saar) rate to -0.1% (from -0.4% in December). Looking at the breakdown, also with qoq/saar figures, primary sector grew 19.9% (from 3.4%), while services sector decelerated (0.7%, from 1.2%). In turn, industrial sector fell by 5.5% qoq/saar (from -6.1%), with mining decreasing 14.8% (from -14.0% December), while manufacturing sector kept contracting (-3.1%, from -3.9%). Importantly, GDP excluding primary and mining sectors fell by 0.7% qoq/saar (practically unchanged from December).

We expect economic activity to slow to 1.4% in 2019 (from 2018: 2.0%). Uncertainty over the direction of domestic policy and remaining uncertainties over the approval of the USMCA by the U.S. Congress will continue to weigh on investment. Deceleration in the U.S. economy will also curb growth. However, one-off factors such as gasoline shortages and strikes in some manufacturing seem to have affected economic activity during January. Looking forward, we expect that February’s figure will still be affected from these one-off factors.


Julio Ruiz



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