MEXICO – Solid GDP sequential expansion in 2Q21

Services sector grew at a strong pace boosted by the reopening of the economy

Julio Ruiz


Mexico’s GDP preliminary estimate was broadly in line with market expectations, reflecting also a favorable base effect due to strict social distancing measures a year ago. The flash estimate of GDP growth for 2Q21, published by Mexico’s statistics institute (INEGI), came in at 19.7% year-over-year (from -3.6% in 1Q21), below our forecast of 20.9% and broadly in line with market expectations of 19.8% (as per Bloomberg). According to calendar & seasonally-adjusted data reported by the statistics institute (INEGI), GDP in 2Q21 grew at a similar pace of the unadjusted series (19.6%). Looking at the breakdown, also using calendar & seasonally-adjusted data, industrial sector growth stood at 28.2% in 2Q21 (from -2.0% in 1Q21), while services sector grew 17.0% (from -3.4%).

At the margin, GDP expanded further, supported by services sector. Using seasonally adjusted figures, GDP grew 1.5% quarter over quarter in 2Q21 (from 0.8% in 1Q21), with services growing a solid 2.1% reflecting the reopening of the economy in the quarter. On the other hand, industrial production grew at a slower pace (0.4% quarter over quarter in 2Q21), dragged by the manufacturing sector due to the global microchip supply disruption.

We expect GDP growth of 6.5% for 2021. The manufacturing output (US strong growth) is likely to be one of the main drivers of activity recovery as the microchip global supply disruption fades away during the rest of the year. However, the recent resurgence of the outbreak is a downside risk to services sector. While the newly announced social distancing measure traffic-light system seems less restrictive, a further increase in new deaths and hospitalization capacity can lead to tighter mobility restrictions.  

Julio Ruiz