INEGI Reports Slow Economic Growth in June

Although the Mexican economy grew by 14.7 percent in June in comparison to last year, this figure represents only a 0.3 percent increase from May, according to preliminary data by the National Institute of Statistics and Geography (INEGI). This small month-to-month growth may mean that the country will be unable to recover at the rate expected by President’s Andrés Manuel López Obrador’s administration.

A breakdown analysis of INEGI’s data demonstrated growth in secondary activities, which include manufacturing, by 14.4 percent from June 2020. Comparatively, tertiary services, namely the service sector, expanded by 14 percent over the same period. The only sector to contract last month was secondary services, which involve the processing of raw materials and decreased by 0.7 percent on a month-to-month basis.

According to the governor of Banco de Mexico, Jonathan Health, the bad news “is that INEGI anticipates a fall in industrial activity in June of 0.7 percent, after the 0.1 decline in May. The good news is for the IGAE as a whole, anticipates positive growth between 0.6 percent and 0.3 percent for May and June, respectively” he said via twitter.

President López Obrador had predicted that by the end of the third quarter the economy would be back to pre-pandemic levels. In order to meet this objective, however, the economy would have to grow by 3.74 percent in a little over two months. Despite updated growth projections by several sources, experts do not expect Mexico to reach this goal until 2023, according to the IMF.

The Organization for Economic Co-Operation and Development (OECD) recognizes that  the Mexican economy is being propped up by a strong US recovery via manufacturing exports and remittances evidenced by US Census Bureau data as reported earlier last week by MBN.

Ultimately, despite continued economic growth in the country it is not expected to meet AMLOs desired growth by the end of the year and much less by 3Q2021. After a GDP contraction of almost 9 percent, almost 2.4 times more than its USMCA partners, for recovery to take longer especially in the absence of federal driven economic stimulus and continued depression in private investment. While Mexico will not be able to meet its pre-pandemic economic performance levels it has surpassed expectations and could potentially make increased headwinds with federal intervention.