Mexico: GDP contracts at milder pace in Q3 as activity resumes from Covid-19 shutdown
According to a preliminary reading, GDP shrank 8.6% on an annual basis in the third quarter, after collapsing a record-breaking 18.7% in the second quarter due to the Covid-19 blow. The result was broadly in line with market expectations. On a seasonally-adjusted quarter-on-quarter basis, economic activity surged 12.0% in Q3, the sharpest increase on record, following the unprecedented 17.1% pullback logged in Q2 and breaking a streak of five consecutive quarters of decline.
The softer downturn reflected a broad-based improvement across the major sectors as the economy gradually emerged from lockdowns starting in June. The industrial sector contracted at a softer 8.8% year-on-year in Q3 (Q2: -25.7%), supported by strengthening external demand and the reopening of key industries such as auto and construction. Similarly, services activity declined 8.8% on an annual basis, after plummeting 16.2% in Q2. Lastly, agricultural production jumped 7.8% year-on-year, rebounding strongly from the 0.5% slip logged in Q2.
Despite the signs of improvement, the economic recovery remains fragile, with the services sector in particular still struggling to pick up more significant pace as consumer confidence and employment remain well below pre-pandemic levels. Although the economy is seen rebounding strongly next year, the timid fiscal response to the crisis and still-elevated number of cases cloud the outlook.
The INEGI will release a second GDP estimate on 26 November.