Itaú BBA - MEXICO – Monthly GDP deteriorated in February

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MEXICO – Monthly GDP deteriorated in February

Abril 24, 2020

Weak momentum in monthly GDP before COVID-19

Monthly GDP was broadly in line with market expectations.  Mexico’s monthly GDP proxy (IGAE) contracted 0.6% year-over-year in February (from -0.8% in January), above our forecast of -1.0% and broadly in line with market expectations of -0.65% (as per Bloomberg). The figure was boosted by a positive calendar effect. According to calendar adjusted figures, monthly GDP contracted at a faster pace (1.6% year-over-year in February, from -0.7% in January), taking the annual quarterly rate to -0.7% in February (from -0.5% January). Looking at the breakdown, also using calendar adjusted figures, the annual quarterly rate of the industrial sector deteriorated to a contraction of 2.1% (from -1.6%), with construction and manufacturing output contracting 7.4% and 1.5%, respectively. In turn, services sector remained stagnant as the quarterly annual growth rate stood at 0% in February (practically unchanged from January).

At the margin, economic activity momentum remained weak. Using seasonally adjusted figures, monthly GDP deteriorated to a contraction of 0.2% month-over-month in February (from zero growth in January), taking the quarter-over-quarter annualized (qoq/saar) rate to -0.8% in February (practically unchanged from January). Looking at the breakdown, industrial sector improved, but momentum remained weak (-1.1% qoq/saar, from -2.6%), dragged by manufacturing (-2.1% qoq/saar), while mining and construction expanded 7.4% and 3.9%, respectively. Services sector recovered slightly on a monthly basis (0.1% month-over-month in February, from -0.2% in January), but momentum was also poor  (-0.7% qoq/saar in February, from -0.3% in January).

Our -3.7% GDP growth forecast for this year has a downside bias amid a shy fiscal stimulus to support the economic recovery in 2H2020, after a sharp contraction expected in the 2Q20 due to coronavirus outbreak. Uncertainty from domestic policy direction is also a drag to Mexico’s economic outlook. 


Julio Ruiz



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