Mexico: GDP contracts at record pace in Q2 as Covid-19 ravages activity
July 30, 2020
According to a preliminary reading, GDP collapsed 18.9% year-on-year in the second quarter, more severely than the 1.4% contraction tallied in the first quarter but slightly above market expectations. The result marked the sharpest decline on record. Similarly, on a seasonally-adjusted quarter-on-quarter basis, economic activity plunged an unprecedented 17.3% in Q2, following the previous quarter's 1.2% contraction.
The heavy contraction was due to the suspension of non-essential activities during April and May as part of the measures enforced to contain the spread of Covid-19, which led to unparalleled drops in both industrial and services activity. Industrial output plummeted 26.0% on an annual basis (Q1: -2.9% yoy), while the services sector shrunk 15.6% year-on-year (Q1: -0.7% yoy). Moreover, agricultural production declined 0.7% (Q1: +1.4% yoy).
Available data suggests that activity recovered somewhat in June as factories, particularly in the manufacturing segment, resumed operations and as services activity began to pick up pace—boding well for the second half of the year. However, lingering restrictions and an elevated number of Covid-19 cases may hamper a full normalization of activity going forward.
The INEGI will release a second GDP estimate on 26 August.
Author: Javier Colato, Economist