Mexico's Economic Recovery Is Losing Momentum After Strong Rebound

Press release from Fitch Ratings

London/New York-14 October 2020: The latest data for Mexico suggest that the pace of economic recovery is slowing after a sharp rebound in June. Robust incoming data in June and July indicate that growth in 3Q20 could be higher than the 6.5% qoq projected in Fitch Ratings' September Global Economic Outlook, but there are clear signs that momentum is slowing, according to our economics team's latest dashboard.

The sharp rebound in industrial production in June, followed by slower growth in July and August, imply that industrial production could rise by more than 21.7% qoq in 3Q20. Yet, manufacturing output grew by a meagre 0.8% mom in August, after a strong pick-up in the previous two months, suggesting that most of the rebound has passed. Survey indicators were still in contraction territory throughout 3Q20, pointing to a deceleration ahead.

The services sector shows the same pattern, with lower growth in retail sales and services output in July and strongly depressed confidence indicators. Recovery in the labour market is on track, but large employers, such as the hospitality and tourism sectors, are still performing at much lower levels than pre-pandemic crisis. High unemployment, ongoing uncertainty regarding the evolution of coronavirus cases and slow re-opening of the economy are dampening confidence and hampering private consumption.

The external sector is performing well, however, as subdued domestic demand is being reflected in the continuous contraction in imports, which combined with a rapid pick-up in exports driven by a rebound in the US manufacturing sector, is leading to a record-high trade surplus.