MEXICO – Domestic demand continued to recover in 2Q21

Domestic demand recovered further reflecting the reopening of the economy.

Julio Ruiz

20/09/2021


Annual domestic demand growth in 2Q21 reflects mainly a favorable effect (strict social distancing a year ago). Aggregate supply and demand rose by 23.3% year-over-year in 2Q21 (from -2.9% in 1Q21), below our forecast of +24.8%. On the demand side, domestic demand rose by 21.5% year-over-year in 2Q21 (from -3.5% in 1Q21), while exports of goods and services expanded by 41.9% (from -4.3% in the previous quarter). Within domestic demand, private consumption rose 22.6% year-over-year in 2Q21 (from -4.2% in 1Q21), while government consumption grew 3.9% yoy, up from -0.7% yoy in 1Q21. Gross fixed investment rose 34.1% yoy, from -4.9% yoy in the previous quarter.          

At the margin, domestic demand recovered further reflecting the reopening of the economy amid the easing of social distancing measures. Using seasonally-adjusted figures, domestic demand grew 1.5% quarter-over-quarter in 2Q21, but it is still 2.9% below pre-outbreak levels in 4Q19. Within domestic demand, private consumption expanded 1.9% qoq/sa, after growing 2.9% in 1Q21, while government consumption accelerated to 2.6% qoq/sa from 0.5% in the previous quarter. Gross fixed investment rose 0.5% qoq/sa (5.3% qoq/sa in 1Q21), while exports of goods & services expanded by 2.9% qoq/sa, after contracting 3.3% qoq/sa in 1Q21.  

We forecast a GDP-growth of 6.5% for 2021. However, activity risks are biased to the downside, mostly due to supply disruptions affecting auto production and a still-challenging health scenario.



Julio Ruiz