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However, activity rebounded in February and likely in March

The 1Q24 GDP flash estimate, published by Mexico’s statistics institute (INEGI), came in at 1.6% yoy, below market consensus of 2.3% (as per Bloomberg).  The annual figure was dragged, in part, by an unfavorable calendar base effect. In fact, according to calendar & seasonally adjusted data reported by INEGI, GDP in 1Q24 grew at a stronger pace (2.0%) than the regular series. At the margin, GDP expanded at a soft 0.2% qoq/sa, dragged mainly by industrial production (-0.4%) and a soft primary sector (-1.1%), while services sector was resilient at 0.7%. The quarterly GDP flash estimate implies the monthly GDP expanded further in March (1.2% mom/sa, after a strong expansion in February of 1.4%) driven by a resilient services sector (0.9%, from 1.2%).


Our view:  Our GDP growth forecast of 2.8% for 2024 has a downward bias given a soft 1Q24. However, we note that the soft 1Q24 GDP was mainly due to the weak monthly GDP print in January, while the February activity figure expanded at a strong pace, and March is likely to expand further. The rebound of activity, also considering strong fiscal spending, increases the odds of Banxico keeping its policy rate unchanged at 11.00% in the May 9 monetary policy meeting.


Julio Ruiz