A survey of analysts suggests Mexico's economy probably climbed back into growth in the April-June quarter, powered largely by a pickup in industrial output.
The median projection from the poll places quarter-on-quarter, seasonally adjusted gross domestic product growth at 1.3% for the second quarter, following a 0.6% decline in the first quarter. If the estimate is confirmed by official data, it would represent the country's strongest quarterly showing since the first quarter of 2022. Mexico's statistics agency is scheduled to publish its preliminary estimate of second-quarter GDP on Thursday.
In a report, Itau characterized the expected improvement as reflecting "a rebound in industrial activity and continued, albeit moderate, growth in services, broadly consistent with recent monthly indicators." Recent monthly measures have pointed to mixed but improving performance across segments of the economy.
A leading indicator of economic activity, the IOAE, forecast expansion in June after recording a contraction in May. The IOAE attributed the recovery largely to a revival in secondary sectors, specifically manufacturing, mining and construction.
On an annual basis, the poll respondents estimate GDP growth of 1.5% for the second quarter, up from a 0.2% year-on-year increase in the first quarter. That annual pace sits amid contrasting forecasts for the full year.
In early July, the International Monetary Fund reduced its growth projection for Mexico this year to 1.2% from a prior estimate of 1.6%. The government has said it expects a stronger outcome than the IMF forecast. The Ministry of Finance puts its full-year GDP outlook in a range between 1.8% and 2.8%, a stance that is more optimistic than market expectations, where the consensus stands at 1.1%.
The coming release of the preliminary GDP figure will provide the first official confirmation of the second-quarter trend and will be watched closely by market participants and policymakers given the range of full-year forecasts.
Context for markets and sectors:
- Secondary sectors - manufacturing, mining and construction - appear to be the main contributors to the quarterly rebound.
- Services are expected to register modest but positive growth, supporting overall economic activity.
- Discrepancies among forecasts from the IMF, the government and market analysts leave the full-year outlook uncertain.