Mexico: What Do the Latest Data Tell Us?

Delia Paredes & Genevieve Signoret

(Hay una versión en español de este artículo aquí.)

Preliminary GDP figures for the third quarter of 2024 show a rebound in Mexico’s economic activity thanks in part to a recovery in agricultural output from La Niña. In our view, however, this rebound will not be sustained in subsequent quarters. All signs indicate that the economy is slowing down.

Economic activity in Mexico rebounded in Q3 2024…

Gross domestic product, quarter-on-quarter % change

Source: Inegi.

Already in quarter three we saw clear signs of said slowdown from the demand side. During the first half of the year, private consumption was an important driver of economic activity. But the burst in election-related spending has faded, and job creation slowed last quarter from an average annual growth rate of 2.5% to just 1.8%. Both factors are holding back consumption.

Real wages, too, slowed down in quarter three. Combined with slowing job creation, this implies deceleration in aggregate salaries. That said, we do not anticipate a sudden collapse in aggregate salaries. The year-over-year growth rate for aggregate salaries is at a historic high at 6.1%, a pace far more rapid than the 10-year average pace, 4.8%.

…but private consumption was on a decelerating trend on Q3 2024

Private consumption (3m moving average, annual % change)		Aggregate salaries (annual real % change)
Source: Inegi.		Source: Inegi, STPS.

As we had anticipated, the pace of gross fixed investment is trending down as well. In the third quarter, investment grew by only 2.1% compared with 7.4% in quarter two largely because public works lost strength after last year’s boom. Construction contracted. And, while investment in machinery and equipment did continue to expand, it did so more slowly than earlier.

And gross fixed investment has moderated as the push from last administration’s flagship projects wanes

Gross fixed investment by sector (3m moving average, annual % change)		Gross fixed investment by component (3m moving average, annual % change)
Source: Inegi.		Source: Inegi.

Recent figures from the IMEF Indicator, too, point to deceleration in the current quarter. It seems clear that confidence in future growth is waning.

Leading indicators for the third quarter suggest that deceleration continues

IMEF indicator (diffusion index)

Source: IMEF.

Quarter three did bring some relief on the inflation front. The 12-month rate fell to 4.6. It helped that (volatile) agricultural and fuel prices eased, but a more important factor still was core inflation. It slid down into Banxico’s target range in September for the first time since February 2021.

Inflation moderated in Q3 2024

Consumer price index, 12-month % variation

Source: Inegi.

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