(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.)
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
