Mexico's GDP slows for 6 consecutive quarters

Mexico's GDP grew 1.9% annually in seasonally-adjusted terms in the first quarter, below the 2.3% registered in the previous quarter and the sixth consecutive quarter with slowing growth, statistics institute Inegi reported.

Although the figure was close to the 2.0% Inegi projected, it is the lowest recorded since the first quarter of 2021, when the economy was still suffering the effects of the COVID-19 pandemic and contracted 1.6%.

The growth in 1Q24 was mainly driven by tertiary activities (trade and services) which advanced 2.4% at an annual rate, followed by secondary activities (mining, construction, manufacturing, generation, transmission and distribution of water, electricity and gas), with 1.5%, and primary activities (agriculture, livestock, fishing), up 0.7%.

Compared to the fourth quarter of 2023, GDP increased 0.30%, according to Inegi, with a previous estimate of 0.21%. This quarterly growth represents a rebound after GDP showed no variation in the third quarter.

"Despite the upward adjustment of GDP in Q1, it is still worrying, since it is an election year in which economic growth is typically concentrated in the first quarter, given the greater public spending and optimism that political campaigns usually generate with the promises they make," Gabriela Siller, director of economic studies at Banco Base, wrote on X.

Inflation

Inegi also published inflation data for the first half of May, which reached 4.78% at an annual rate, with Siller highlighting that “inflationary pressures continue in Mexico.”

“In the first nine fortnights of 2024, inflation in Mexico has shown mixed behavior. It registered a maximum of 4.90% in the first fortnight of January, it slowed down to a minimum of 4.35% in the second fortnight of February and accelerated again in the first half of May to 4.78%,” she wrote.

Siller said that although annual commodity inflation has shown a marked deceleration since the end of 2022, the mixed behavior seen recently “could indicate a slight rebound in this component or an exhaustion in its rate of deceleration.”

Based on this data, Banco Base predicts that annual inflation will approach 5% in May and exceed that figure in June and July, but gradually decrease and reach 4.4% at the end of the year.

The main inflation risks, according to Siller, are blackouts, crime, rising labor costs, high government deficits, droughts and the effects of climate change, as well as high inflation in the US.