The Mexican economy grew more than expected in the third quarter (Q3) of 2024, expanding 1.5% in annual terms and 1% compared to the second quarter, according to official preliminary data.
The national statistics agency INEGI also reported Wednesday that GDP increased 1.4% annually in the first nine months of 2024 in seasonally adjusted terms and 1.7% in non-adjusted figures.
The annual economic growth rate for Mexico in Q3 was 0.2 percentage points above the median estimate of economists surveyed by Bloomberg. The quarter-over-quarter rate also came in slightly higher than the 0.65% consensus forecast of economists polled by Bloomberg.
The 1% growth compared to the April-June quarter was the best result for the Mexican economy since the second quarter of 2023. Quarter-over-quarter growth in Q2 of 2024 was just 0.2%.
All three sectors of the economy grew in both annual and quarter-over-quarter terms in Q3, but the primary sector easily recorded the best results.
Bloomberg reported that domestic demand has been “a boon” for the Mexican economy “as consumers continued to spend even while weakness in the US, Mexico’s largest trading partner, affected exports.”
“A tight labor market, rising wages and remittance flows running at record highs have helped to support brisk household demand,” the news agency said.
Ag sector grows almost 5% in Q3 compared to Q2
INEGI’s preliminary data shows that the primary or agriculture sector grew 4.6% between July and September compared to the previous three-month period.
In annual seasonally-adjusted terms, primary sector GDP increased 3.8%.
Strong rainfall in the third quarter assisted the recovery of the agriculture sector after it contracted in both Q1 and Q2.
Compared to the first nine months of last year, the sector contracted 0.2% in seasonally adjusted terms.
Secondary and tertiary sectors grow 0.9% compared to Q2
The secondary or manufacturing sector grew 0.9% in Q3 compared to the previous quarter and 0.5% in annual seasonally adjusted terms.
In the first nine months of the year, the sector grew 0.8% in annual terms.
The tertiary or services sector also expanded 0.9% between July and September compared to Q2. In annual seasonally adjusted terms, the sector grew 1.9% in both the third quarter and the first nine months of 2024.
Analysts’ views on the growth data
Gabriela Siller, director of economic analysis at Banco Base, acknowledged that Mexico’s GDP increased more than expected in Q3. However, the growth rate is still “low,” she said on X, noting that the Mexican economy in 2024 is on track to grow at less than half the pace it grew last year.
Mexico’s economy grew 3.2% annually in 2023.
Buen resultado del PIB mexicano en el 3er trimestre.
Se expandió 1.0% a tasa *trimestral* para dejar atrás tres trimestres de bajo crecimiento.
La política monetaria ultrarrestrictiva y la menor demanda de importaciones en EEUU (aunque México gane participación), además de la… pic.twitter.com/HPw05uMUmn
— Mario Campa (@mario_campa) October 30, 2024
Alberto Ramos, chief Latin America economist at Goldman Sachs, said that the third quarter economic data showed a solid, broad based increase in economic activity.
Mario Campa, an economist, said that the growth rate in Q3 was a “good result.”
He noted on X that the 1% quarter-over-quarter growth was an improvement on “low growth” rates in previous quarters.
“The ultra-restrictive monetary policy [in Mexico] and lower demand for imports in the United States … as well as electoral uncertainty in the U.S. and [Donald Trump’s] protectionist threats limit [Mexico’s growth] possibilities in the short term,” Campa added.
Despite recent reductions, the Bank of Mexico’s benchmark interest rate remains high at 10.50%.
2024 and 2025 economic growth forecasts for Mexico
Earlier this month, the World Bank lowered its 2024 growth forecast for the Mexican economy to 1.7%. That prediction is in line with Mexico’s non-seasonally adjusted annual growth rate in the first nine months of the year.
The World Bank anticipates 1.5% growth in Mexico in 2025.
The International Monetary Fund also recently cut its 2024 growth forecast for Mexico, lowering its prediction to 1.5%. The IMF is forecasting 1.3% growth in 2025.
Felipe Hernández, a Latin America economist for Bloomberg, also predicts that economic growth will slow in 2025.
“Nationalist government policies and waning public-sector investment are headwinds,” he said.
“Falling interest rates provide some relief, but monetary conditions remain tight. Uncertainty about the U.S. election is a drag,” Hernández said.
There are also concerns that the recently-enacted judicial reform could have a negative impact on foreign investment levels in Mexico as the country attempts to capitalize on its nearshoring opportunity. Such an eventuality could also weigh on growth.
President Claudia Sheinbaum has sought to calm investors’ nerves about the plan to allow Mexicans to directly elect all judges, and earlier this month told Mexican and U.S. business leaders that their investments in Mexico are “safe.”
With reports from El Economista, Bloomberg and La Jornada
