Macro Watch: Mexico's January economic activity

In its presentation of Mexico's global economic activity indicator (IGAE) for January Friday, statistics agency Inegi reported the economy grew 2.15% year-on-year and 0.7% month-on-month, suggesting a strong rebound at the start of the year.

However, adjusted for seasonal effects, the monthly metric actually contracted 0.65% in January, as services registered a 0.4% month-on-month decline and industrial activity grew a meager 0.04% - the result of a 0.5% monthly drop in manufacturing.

On the positive side, the seasonally adjusted subcomponent for construction grew 0.5% month-on-month, while mining jumped 1.6%. Primary sector activity also expanded, rising 1.3% in January from the previous month.

In an investor note, Banorte-IXE offered a positive spin, noting that economic activity actually expanded 4.4% comparing November 2017 to January 2018 to the same period 12-months previous, a period marked by the economic tailspin accompanying US presidential elections in November 2016.

Using the same comparison, industrial production advanced 2%, while services surged 3.9%.

Citibanamex said the results suggest economic activity in the first quarter began "slightly weaker than we expected," adding that it is maintaining its projection of 0.8% nominal annual growth in 1Q18.

Looking ahead, Banorte sees the combined uncertainty surrounding Mexico's July 1 general election and choppy Nafta renegotiations generating peso depreciation in the second quarter, which could help exports and by consequence manufacturing and the overall industrial sector.