Itaú BBA - MEXICO – Weak 4Q19 GDP flash estimate

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MEXICO – Weak 4Q19 GDP flash estimate

Janeiro 30, 2020

The economy likely contracted 0.1% in 2019

Mexico’s GDP flash estimate was above market expectations. The flash estimate of GDP growth for 4Q19, published by Mexico’s statistics institute (INEGI), came in at -0.3% year-over-year, below our forecast (-0.6%) and market expectations of -0.5% (as per Bloomberg). The 4Q19 flash estimate figure imply GDP contracted 0.1% in 2019, the first contraction since 2009. According to calendar & seasonally-adjusted data reported by the statistics institute (INEGI), GDP in 4Q19 grew at a similar pace. Looking at the breakdown, also using calendar & seasonally-adjusted data, industrial sector contracted 1.5% in 4Q19 (from -1.4% in 3Q19), while services sector stood at 0.1% (practically unchanged from 3Q19). 

At the margin, GDP in 4Q19 remained stagnant. Using seasonally adjusted figures, the GDP stood at 0.0% quarter-over-quarter in 4Q19 (practically unchanged from 3Q19). Looking at the breakdown, industrial sector deteriorated further (-1.0% in 4Q19, from  -0.1% in 3Q19), while services, the largest sector of the economy, recovered to 0.3% (from 0.1%). In turn, primary sector contracted 0.9% (from 3.3%). 

We expect economic activity to recover gradually to 1.1% in 2020. The fading effect of the government transition on fiscal spending and the recent approval of the USMCA in the U.S. Congress (reducing uncertainty) should support some recovery this year. Moreover, if the recent stabilization of oil output lasts, the mining sector would also contribute to a GDP growth improvement in 2020.

Julio Ruiz

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