Mexico: The economy bounces back in Q1, powered by the agricultural sector
GDP reading: According to a preliminary estimate, economic activity rebounded 0.2% on a seasonally adjusted quarter on quarter basis in the first quarter, contrasting the 0.6% contraction tallied in Q4 and beating market expectations. On an annual basis, economic growth edged up to 0.8% in Q1 from the previous period’s 0.5% expansion.
Agriculture was the only sector to expand in Q1: A large jump in the agricultural sector (8.1% s.a. qoq) drove the Q1 expansion. In contrast the services sector stagnated, while industrial output fell 0.3%. Government spending restraint, U.S. tariffs imposed on Mexico in March and the threat of more tariffs to come likely all dampened the services and industrial sectors. That said, some front-loading of exports to the U.S. could have provided support to the economy in Q1.
Panelist insight: On the outlook, Goldman Sachs’ Alberto Ramos said:
“Going forward, real activity is likely to face headwinds from post-election policy uncertainty, a negative fiscal impulse, and soft business confidence. On the positive side, household spending is likely to continue to benefit from still firm credit flows and solid wage growth (including generous minimum wage increases). Public investment (public works) is expected to soften given the need for fiscal consolidation, and private investment to be impacted by both domestic and external uncertainty, in particular with regard to the US trade-policy (tariffs) and the outcome of the USMCA review.”