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Mexico GDP Q1 2024

Mexico: GDP growth ticks up in the first quarter

According to a preliminary estimate, GDP growth picked up to 0.2% on a seasonally adjusted quarter-on-quarter basis in the first quarter, from 0.1% in the fourth quarter of last year. The still-fairly-limp Q1 growth reading was due to a large fall in output in January. On an annual basis, economic growth slowed markedly to 1.6% in Q1, from the previous quarter’s 2.5% increase. Q1’s reading marked the softest expansion since Q1 2021.

In Q1, contractions in the primary and second sectors were more than offset by an expansion in services. Primary activity could have been dampened by a severe drought, and secondary activity by the strong peso hurting export competitiveness. In contrast, the services sector benefited from strong remittances, employment, wages and tourist arrivals.

Our Consensus is for GDP growth to pick up in sequential terms later this year, spurred by rate cuts from the Central Bank.

On the outlook, Itaú Unibanco analysts said:

“Our GDP growth forecast of 2.8% for 2024 has a downward bias given a soft 1Q24. However, we note that the soft 1Q24 GDP was mainly due to the weak monthly GDP print in January, while the February activity figure expanded at a strong pace, and March is likely to expand further.”

Credicorp Capital analysts sounded more upbeat:

“We still expect that investment in civil works, in the context of a change of administration, will continue to drive economic growth in 1H24. We reiterate that our view is the upward revision of growth expectations for its main trading partner, the US, to close to 2.0%-2.7% in 2024 points to an improvement in external demand and resilience in foreign currency inflows, thus, reversing the faltering goods demand from the US.”

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