(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.)
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
