MEXICO – Sequential internal demand improved in July

Soft growth in private consumption is likely reflecting the start of the retightening of social distancing measures

Julio Ruiz


GFI grew 15.7% year-over-year in July (from 16.9% in June), below our forecast of 16.8% and slightly above market expectations of 15.1% (as per Bloomberg). Using figures adjusted by working days, GFI grew at a faster pace (16.8%), taking the quarterly annual growth rate to 25.2% in July (from 33.7% in 2Q21). Looking at the breakdown, also with calendar adjusted figures, construction and machinery & equipment investment quarterly annual growth rate stood at 20.5% in July (from 27.6% in 2Q21) and 31.8% (from 41.6%), respectively.  

Using seasonally adjusted figures, GFI expanded at a solid 2.1% month over month in July, but momentum remained soft with a zero quarter-over-quarter annualized growth rate (qoq/saar). Looking at the breakdown, the qoq/saar of construction investment stood at -3.0%, while machinery & equipment investment came in at 4.3%.

On another note, private consumption registered a slight expansion at the margin, likely reflecting a mild retightening of social distancing measures in the end of the month amid the third COVID wave. The monthly proxy for private consumption expanded 11.9% year-over-year in July (from 19.1% in June). At the margin, private consumption expanded 0.1% mom, taking the qoq/saar to 8.0% in July (from 13.4% in 2Q21).

We expect GDP growth at 6.5% for 2021.  However, risks are biased to the downside as we expect a slowdown in the 3Q21 dragged by vehicle production due to the global microchip supply disruption.

Julio Ruiz