(Bloomberg) — Mexico’s economy grew the most in a year during the first quarter, surprising most economists, as robust remittances stoked domestic consumption and with exports surging to meet strong US demand.
Gross domestic product expanded 1.1% in the first quarter from the previous three months, compared with the 0.8% median estimate of analysts surveyed by Bloomberg, according to preliminary data released by Mexico’s national statistics institute on Friday. From the same period a year ago, the economy grew 3.9%, also up from the economists’ 3.3% forecast.
“This is a solid report, showing a resilient economy on the back of supportive remittances, rising exports, and improving labor conditions,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. “We expect economic activity to be more resilient than in previous cycles.”
The economy’s accelerating growth gives some pause to economists who’ve predicted that the country is headed for a contraction later in the year, due to the expected downturn in the US, Mexico’s biggest trading partner. Part of the surprise is the boost from the domestic market, which has contributed especially to the revival of the services sector, after it plunged earlier during the pandemic.
The Mexican peso erased earlier losses and strengthened as much as 0.3% after the first quarter release.
US Slows
Mexico’s growth contrasts with the situation in the US, which earlier this week said its gross domestic product rose at a 1.1% annualized rate in the first three month of the year, slowing more than expected. Brazil, Latin America’s largest economy, also surprised on Friday with faster-than-expected growth during February.
Goldman Sachs Group Inc. raised its Mexico’s forecast for this year’s GDP growth to 2.1% from 1.8% after the preliminary data, according to a note by its chief Latin America economist Alberto Ramos.
Read More: Brazil’s Economy Shoots Past Forecasts Before Rate Decision
What Bloomberg Economics Says
“Domestic demand is robust amid tight fiscal and monetary conditions. Activity is benefiting from changes in global trade trends despite nationalistic government policies. We expect it to continue rising. A potential US recession in 2H remains a risk.”
— Felipe Hernandez, Latin America economist
— Click here for the full report
“There’s strength in the labor market, with the rise in minimum wages, that permeates other salaries in terms of an ability to negotiate,” said Montserrat Aldave, economist at Casa de Bolsa Finamex. “There could be a certain resilience even if the United States falls into a recession, because of this strong internal demand.”
The agriculture sector grew 2.4% in the first quarter from the year prior, while manufacturing grew 2.7% and the services sector 4.4%. The economy has now posted six straight quarters of growth, the longest run under President Andres Manuel Lopez Obrador, underscoring its resilience and the sustained demand for goods produced in Mexico’s manufacturing centers.
And in a promising development heading forward, monetary policy may be near an inflection point after almost two years of tightening. Banco de Mexico’s Governor Victoria Rodriguez said April 25 that the central bank will discuss halting its record hiking cycle of interest rate hikes in the next board meeting in May.
The board members of Banxico, as the central bank is known, voted unanimously to raise borrowing costs by a quarter of a percentage point in the last meeting, pushing the key rate to a record 11.25%. The bank has acted in recent months far more aggressively than other inflation-targeting banks across Latin America.
Economists in the Citibanamex survey of economists published last week marked up their forecast for 2023 gross domestic product growth to 1.6%, up from 1.4% in the previous survey from early April and 1% in early February. That is in line with the estimate given by the central bank in March. Both the government’s fiscal austerity and the bank’s tightening cycle have placed restrictions on economic growth, according to analysts.
Nevertheless, manufacturing companies have been moving especially to states in northern Mexico as part of a global relocation process known as nearshoring. The record $53.6 billion exports in March, which led to an unexpected trade surplus, was a sign that the country continued to see demand for its goods in the US.
Mexico has turned into a gleaming point of investment for everyone from electric vehicle makers to a slew of companies looking to relocate manufacturing from countries farther from US consumers. The rush for industrial space has analysts predicting it will transform Mexico’s commercial future, if the country plays its cards right.
“Nearshoring is already helping the Mexican economy to keep the growth momentum achieved last year,” said Gabriel Casillas, chief Latin America economist at Barclays Plc. “This is supporting a more dynamic environment in construction -in which commercial bank credit is actually increasing at rates above 100% year-over-year in nominal terms-, as well as in services related to the planning, design, and development.”
–With assistance from Rafael Gayol and Carolina Gonzalez.
(Update with peso reaction in fifth paragraph, nearshoring comments at the bottom of the story.)
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
