Mexico: Second estimate confirms softer economic contraction in Q3
November 26, 2020
According to a second estimate released by the INEGI on 26 November, GDP contracted 8.6% on an annual basis in Q3 (Q2: -18.7% yoy), matching the flash estimate. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, economic activity soared 12.1% (Q2: -17.1% s.a. qoq), revised slightly upwards from the preliminary reading of 12.0% and marking the strongest upturn on record.
The milder downturn reflected a broad-based improvement across the major sectors of the economy as activity gradually resumed following the easing of Covid-19 restrictions. Industrial sector output fell a much more moderate 8.8% year-on-year in Q3 (Q2: -25.5% yoy), primarily as manufacturing industries, particularly those tied to the auto segment, benefited from strengthening foreign demand. Similarly, the services sector—the economy’s engine of growth—shrank 8.8% in annual terms (Q2: -16.3% yoy), with activity in the trade and transportation sectors contracting less severely compared to Q2. Lastly, primary activities jumped 7.7% year-on-year, rebounding strongly from the 1.5% slump logged in Q2 and marking the sharpest increase in nearly eight years.
Despite positive developments regarding the recovery, signs have emerged that it is slowing as the year comes to a close. The monthly economic activity indicator for September showed a slowdown in momentum, while industrial production virtually stagnated from the prior month. The economy is seen rebounding back to growth next year, however, as demand revives. Nevertheless, significant downside risks remain, including subdued sentiment weighing on households and businesses, a waning recovery in the U.S. and the unpredictable course of the pandemic.
Author: Javier Colato, Economist