Mexico’s economic activity recorded a contraction in July 2022, indicating its third record of losses, according to data from the National Institute of Statistics and Geography (Inegi).
According to the results of the new Timely Indicator of Economic Activity (IOAE), a monthly fluctuation in the Global Indicator of Economic Activity (IGAE) is estimated with a decrease of 0.13 percent in the seventh month of the year.
The economy added its third consecutive month of contraction, down 0.19 percent in May and 0.14 percent in June.
That would still leave the General Activity Index 0.63 percent below its pre-pandemic level (February 2020).
After economic activity, a monthly decline of 0.1 percent is estimated in tertiary activities (trade, tourism, communications, among others), adding the third month of losses.
On the other hand, secondary activities (including mining, construction, manufacturing) are expected to decline 0.2 percent in July, their first decline after four months of gains.
Finally, an index reading of 111.1 for the IGAE, 101.2 for secondary activities and 115.8 for tertiary activities is estimated for June 2022.
In a year-on-year comparison, the economy is expected to show an increase of 1.5 percent; industrial activity, up 2.7 percent; and the service sector, up 0.8 percent.
Ernesto O’Farril, President of Grupo Bursamérica, pointed out that the data for June and July reflected poor results in both trade, manufacturing and energy sectors and weakness in the labor market, noting that this is the case it is likely that the IGAE could be even lower.
“For the latter part of the year, it is predictable that the economy as a whole will continue to slow down, due to a combination of factors such as slowdown,” he added.
James Salazar, deputy director of economic analysis at CIBanco, pointed out that the negative results were due to high inflation, rising interest rates and uncertainty about a possible recession in the US economy.
“If the IOAE data consolidates in July, the loss of momentum that started at the end of the first half of the year could materialise, all of which is linked to high inflation, rising interest rates and ongoing concerns in the US economy,” he added .
Gerardo Copca, director of MetAnálisis, assured that “due to the increase in both consumer and producer prices, the decline in economic activity has infected practically all sectors, this would lead us to a slowdown”.
“Furthermore, this slowdown is the answer to what the Bank of Mexico (Banxico) is looking for by raising interest rates so inflation starts to fall.”
For Copca, the economic outlook looks very uncertain on the international side, which is unfavorable for Mexico as it depends on the US economy, which is speculated to be in recession, which would affect the development of national exports.
“Today’s data highlights the panorama of uncertainty that is dominating the economy as, despite the fact that the numbers came out better than estimated, the trend reversal over the past three months is quite evident and there are no visible catalysts at the moment. that allow us to anticipate something else in the short term,” assured Marcos Daniel Arias Novelo, economic analyst at Monex.
“The impact of tightening monetary policy will dominate at the end of the year, keeping the likelihood of observing a scenario of consecutive contractions or stagnation on the table. Therefore, we will await further information on the third quarter to revise our forecasts, remembering that we expect growth of 1.4 percent for 2023,” he said.
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