Mexico: Economy grows in annual terms in Q2 although quarter-on-quarter data is less promising
In annual terms, expenditure-based national accounts data released on 20 September confirmed a broad-based improvement across aggregate-demand data in the second quarter. Metrics released by the Statistical Institute (INEGI) showed that the economy grew 2.6% year-on-year, up from the 1.4% expansion observed in the first quarter. Notably, aggregate supply and demand climbed 4.0% from a year earlier, just shy of analysts’ estimates. Despite the encouraging year-on-year figures, however, quarter-on-quarter and high-frequency datasets have continued to paint a far bleaker picture of the economy.
Domestic demand saw an all-around improvement in the second quarter. Household spending accelerated, ticking up to 3.0% annually (Q1: +2.6% year-on-year) and in line with the tight labor market and buoyant remittance inflows. Government spending also rose, growing 2.9% (Q1: +1.1% yoy). Meanwhile, fixed investment jumped in the quarter, expanding 3.9% (Q1: +1.4% yoy), despite the uncertainty generated in the run-up to the 1 July general election. That said, business leaders’ late-quarter embrace of the presidential frontrunner, Andrés Manuel López Obrador, may have bolstered capital spending.
On the external front, exports notched an exceptional 8.3% annual growth in the second quarter (Q1: +2.2% yoy) amid the weaker peso and healthy factory output in the United States. Along with import growth, which clocked in at 7.9% (Q1: +5.9% yoy), the external sector narrowly contributed to growth (Q2: 0.1 percentage points; Q1: minus 1.3 percentage points) in the quarter—the first time in more than a year.