Mexico: Economy contracts for first time in nearly a decade in Q2
A comprehensive GDP estimate released by the Statistical Institute (INEGI) on 23 August showed that output fell 0.8% on an annual basis in the second quarter, coming in slightly worse than the preliminary estimate (previously reported: -0.7% year-on-year) and marking the first contraction since the 2009 economic crisis (Q1: +1.2% year-on-year). Meanwhile, output flatlined in seasonally-adjusted, quarter-on-quarter terms in Q2, revised down from the 0.1% expansion of the flash estimate—indicating that the economy avoided recession by an even narrower margin than initially thought (Q1 2019: -0.3% quarter-on-quarter; seasonally adjusted).
Performance across the major sectors was relatively unaltered from the preliminary release, with the contraction of the industrial sector driving the overall slump. Industrial-sector output fell for the third consecutive quarter and at the sharpest pace since Q4 2009 (Q2: -3.0% yoy; Q1: -0.6% yoy), dragged on by the ailing oil and gas, and construction sub-sectors. Moreover, activity in the services sector was stagnant in Q2 (Q1: +1.8% yoy), which marked the worst outturn since the end of 2009, while primary-sector activity slowed sharply in the quarter (Q2: +1.4% yoy; Q1: +5.7% yoy) on meager gains in agricultural output.
Commenting on the economy’s prospects for the rest of the year, the research team at JPMorgan noted:
“We continue to think a 2H rebound is in the cards, but will likely be shallower than expected. We hold on to the view that consumer fundamentals should eventually rekindle spending, but are a bit less confident about it. In turn, it remains to be seen whether investment will stabilize or mildly pick up as public spending is expedited, benefiting mostly construction outlays. Trade should be a mild positive, but is subject to global manufacturing woes.”