Mexico: Economic activity records best result since Q2 2021 in Q1
According to a preliminary estimate, GDP rose 0.9% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, above the flat reading seen in the fourth quarter of last year. Q1’s reading was the best since Q2 2021.
The services sector grew 1.1% over the previous quarter in seasonally-adjusted terms in the first quarter, contrasting the fourth quarter’s 0.6% decrease and marking the best reading since Q1 2021. Services momentum was likely aided by the fading impact of last year’s labor outsourcing ban. In addition, the industrial sector gained steam, growing 1.1% in Q1 (Q4: +0.4% s.a. qoq) amid a notable rebound in vehicle production in the quarter and higher goods exports. The primary sector contracted 1.9% in Q1, marking the worst reading since Q4 2020 (Q4 2021: +0.2% s.a. qoq).
On an annual basis, economic growth sped up to 1.6% in Q1, from the previous quarter’s 1.1% expansion.
Our panelists see a moderate slowdown in quarter-on-quarter GDP growth in Q2 on the back of tighter financial conditions and a likely slowdown in consumption and import growth in the U.S., Mexico’s key trading partner. That said, the normalization of contact-intensive services activity as the pandemic dissipates should provide support. On the longer-term outlook, analysts at the EIU are downbeat:
“It will take until 2023 for Mexico’s economy to return to pre-pandemic levels—an extremely poor performance by regional standards. […] We expect the dearth of fiscal support for consumers and businesses in 2020–2021 to leave lasting scars in the form of permanent business closures and a deterioration in the quality of the job market. We do not believe that the slightly expansionary fiscal policy planned for this year will boost growth significantly.”