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Mexico Economic Activity January 2024

Mexico: Economic activity falls at sharpest rate since May 2020 in January

The monthly indicator for economic activity (IGAE) slid 0.6% in month-on-month seasonally adjusted terms in January, which was a larger contraction than December’s 0.1% decrease. January’s figure marked the worst reading since May 2020. The weakening was driven by a double-digit fall in primary-sector activity, amid a severe drought, and a softer fall in the services sector. In contrast, industrial activity rose, driven by construction.

On an annual basis, economic activity rose at a quicker rate of 2.0% in January (December: +1.1% yoy), though this reading was below market expectations. Meanwhile, the trend pointed down, with the annual average growth of economic activity coming in at 3.0% in January, down from December’s 3.2%.

On recent data and the outlook, Itaú Unibanco’s Julio Ruiz said:

“The weakness in activity data at the beginning of the year (especially in services), follows January’s lower-than-expected retail sales data […], which are both difficult to square with the resilience of the labor market and the frontloaded expansionary fiscal stance. Our GDP growth forecast for 2024 stands at 2.8% in 2024, supported also by favorable external demand.”

Goldman Sachs’ Alberto Ramos commented:

“Going forward, real activity is likely to face headwinds from high rates and declining workers’ remittances in local currency (a reflection of MXN appreciation). On the positive side, household spending is likely to continue to benefit from still firm credit flows, robust labor market backdrop (including solid formal job creation and generous minimum wage increases), moderating inflation, and an expansionary budget.”

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