Preliminary data released by the national statistics institute INEGI on Thursday indicate that the Mexican economy may have slowed in October, at the start of Q4 2024.
The negative news comes a day before INEGI releases official economic data for September, which is expected to reveal a contraction. INEGI’s revised preliminary report for September — also released this week — projected a 0.2% contraction of the economy.
If the October results pan out as indicated, Mexico could be looking at a third consecutive month of negative growth as August saw a 0.3% economic contraction.
Thursday’s preliminary report — referred to by its acronym as IOAE — suggests that economic activity slowed in October. The contraction was barely perceptible at less than 0.1% compared to the previous month, hinting that the fourth quarter could be off to a sluggish start
The IOAE report uses “nowcasting” methodology to produce estimates of seasonally adjusted economic performance and year-on-year GDP variations. It is important to recognize that the IOAE report only analyzes industry and services. It does not consider the agriculture sector.
The IOAE report for October found that monthly industrial growth remained stagnant, exhibiting almost no growth following 0.6% growth in September’s IOAE report, according to the newspaper La Jornada.
The IOAE indicator allows INEGI to quickly estimate economic activity, rather than waiting months for full reports from each sector. IGAE, on the other hand, is a slower, more accurate measurement based on finalized data.
At the same time, the October report showed no significant monthly change in the services and trade sectors after September’s IOAE report indicated a 0.7% contraction.
“The IOAE paints a gloomier picture than the GDP estimates we’ve seen,” Julio Santaella, former INEGI director, said, according to the newspaper El Economista.
The IOAE report indicates that although there was moderate annualized growth compared to August, September and October of 2023, this year’s data reflects a contraction with regard to previous months.
The GDP estimates to which Santaella referred project 1% third-quarter growth and 1.5% growth compared to the same period in 2023, according to El Economista.
Analysts at Monex, a Mexican foreign exchange company, said the IOAE report contrasts with recent consumer confidence surveys, although it is in line with the latest business sentiment report.
The online publication Animal Político reported that a recent survey of businessmen by the central bank found that expectations of economic growth had slipped. Whereas the Banxico survey found that in January the private sector anticipated GDP growth of 2.4% this year, businessmen surveyed in October expected only 1.4% growth.
A Monex analyst told El Economista that Friday’s release of both September’s GDP report and the official third-quarter data will be revealing.
“Attention will be focused on the construction sector,” the Monex analyst told El Economista, “especially as several public and private sector projects were completed.
With reports from El Economista, La Jornada and Animal Político
