Mexico Economic Forecast

Revised data put Q3 GDP growth at 1.1% in quarterly terms, up from the flash estimate and marking the best reading in a year. A 6.8% surge in construction was a key driver, likely linked to progress on the government’s large infrastructure projects and firms relocating production closer to the U.S. Moreover, services activity was healthy, amid lower inflation and strong growth in wages and remittances, while manufacturing should have benefited from resilient U.S. export demand. Turning to Q4, our panelists are projecting somewhat slower quarterly and year-on-year growth, though Mexico should continue to outperform the Latin American average. Looking at available data, while the manufacturing and non-manufacturing PMIs averaged lower in October–November relative to Q3, vehicle output and exports reached multi-year highs in October, supported by continued robust demand from the U.S.

Inflation came in at 4.3% in October, down from September’s 4.5% and broadly in line with market expectations. October’s figure marked the weakest inflation rate since February 2021, but was still above the Central Bank’s 2.0%–4.0% target range. Inflation is seen above-target for most of 2024 on brisk growth in wages and government spending, only returning to target in Q4.