Macro Latam
< VoltarMonthly GDP was below market expectations in January. Mexico’s monthly GDP proxy (IGAE) contracted 0.8% year-over-year in January (from +0.7% in December), below our forecast of -0.3% and market expectations (as per Bloomberg). According to calendar adjusted figures, monthly GDP contracted at a slightly softer pace (0.7% year-over-year in January, from 0.0% in December), taking the annual quarterly rate to -0.5% in January (practically unchanged from December). Looking at the breakdown, also using calendar adjusted figures, the annual quarterly rate of the industrial sector improved, but kept negative (-1.6% in January, from -2.1% in December), supported by an expansion of mining output (2.4%, from -0.4%), while manufacturing and construction sectors contracted 1.5% (from -1.6) and 5.7% (from -6.0%), respectively. In turn, services sector quarterly annual growth rate stood at 0% (from 0.1%).
At the margin, monthly GDP momentum remained weak, with services moderating. Using seasonally adjusted figures, monthly GDP had a zero growth rate month-over-month in January (from 0.1% in December), taking the quarter-over-quarter annualized (qoq/saar) rate to -0.4% in January (from -1.2% in December). Looking at the breakdown, industrial sector improved, but momentum remained weak (-1.7% qoq/saar, from -5.0%), dragged by manufacturing (-4.1% qoq/saar), while mining and construction expanded 7.1% and 1.2%, respectively. Services sector surprised negatively, with a monthly contraction of 0.2% in January (from 0% in December), taking the quarterly annual rate to 0% (from 0.1%).
We estimate a contraction of 2.5% in 2020 GDP. We expect economic activity to deteriorate sharply in 1H2020, associated to the coronavirus outbreak, recovering at a fast pace during the second half of the year. Uncertainty from domestic policy direction is also a drag to Mexico’s economic outlook.
Julio Ruiz