Mexico’s economy shows signs of stagnation

Mexico’s economic activity recorded a contraction in July 2022, according to the National Institute of Statistical Geography (Inegi). This marked his third loss record.

According to new Timely Indicators of Economic Activity (IOAE) results, the monthly change in the Global Index of Economic Activity (IGAE) is estimated to decrease by 0.13% in the seventh month of the year.

The economy contracted for the third month in a row, by 0.19% in May and 0.14% in June.

The general activity index is therefore 0.63% below pre-pandemic levels (February 2020).

By economic activity, the tertiary activity (commerce, tourism, telecommunications, etc.) is expected to contract by 0.1% each month, adding to the third month’s losses.

Meanwhile, secondary activity (mining, construction, manufacturing, etc.) is expected to show a 0.2% decline in July, the first decline after four months of gains.

Finally, for June 2022, we estimate an index level of 111.1 for IGAE, 101.2 for secondary activity and 115.8 for tertiary activity.

On a year-to-year comparison, the economy is projected to show 1.5% progress. Industrial activity increased by 2.7% and services sector by 0.8%.

Ernesto O’Farrill, president of Grupo Bursamérica, said June and July data reflected weaker trade, manufacturing and energy sectors and a weaker labor market. IGAE may be even lower.

“The economy as a whole is projected to continue to slow down into the second half of this year due to a combination of factors such as a lack of investment and exports starting to slow down affecting the domestic market,” he added.

CIBanco’s deputy director of economic analysis, James Salazar, said the negative result was due to high inflation, rising interest rates and uncertainty over a possible recession in the US economy.

“If the July IOAE data are combined, the loss of dynamism that began at the end of the first half of this year could materialize. Related: Watch the US economy,” he added.

Gerardo Copca, director of MetAnálisis, said: “The slowdown in economic activity is due to higher prices for both consumers and producers, affecting virtually all sectors, leading to a slowdown.” Let’s go,” he declared.

“Additionally, this slowdown is a response to what the Banxico of Mexico (Banxico) is trying to do is raise interest rates to keep inflation down.”

For Kopka, the economic outlook looks very uncertain on the international front, which is a disadvantage for Mexico. This is because the US economy is dependent on the speculated recession, which could affect domestic export performance.

“Today’s data crystallize the panorama of uncertainty that pervades the economy because despite the fact that the numbers are better than forecast, the change in trend over the past three months is very clear. And because there is no visible catalyst at the moment, it allows us to predict something different in the short term,” said Marcos Daniel Arias Novello, an economic analyst at Monex Securities. doing.

“The potential to observe a continued contraction or stagnation scenario remains on the table as the impact of restrictive monetary policy prevails at year-end. We therefore expect 1.4% growth in 2023. With that in mind, we will wait for further information on the third quarter to revise our forecast,” he said.

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