GDP revision shows a 0.43% drop, in Q3, higher than expected

The Mexican economy registered the first post-pandemic fall in the third quarter of the year, completing a 0.4% decrease in real terms and with seasonally adjusted figures compared to the previous quarter, confirmed the National Institute of Statistics and Geography (Inegi).

This quarterly rate incorporates an adjustment with respect to the timely estimate that Inegi released 21 days ago, when it projected that the quarterly contraction could be located at 0.2 percent.

As explained by the president of Inegi, Julio Santaella on his official Twitter account @SantaellaJulio, GDP presented its first decline in the third quarter, after four consecutive quarters of recovery after the contraction due to the pandemic.

When presenting the results, the institute that records the official statistics of economic activity, also adjusted down the GDP rates of the previous quarters, incorporating much more precise data on economic performance.

There you can see how the recovery was losing strength, evidencing the absence of an internal stimulus in the economy, and the impact that, on the other hand, the solid fiscal incentive that the United States gave its inhabitants and that was also spilled in Mexico in the form of remittances and demand for exports, Alejandro Valerio, analyst at risk from the Frontier View consultancy, qualified from Washington.

Thus, according to revised Inegi data, the third quarter of 2020 registered the largest rebound in GDP, of 13.8% compared to the previous quarter; a rate that incorporates an adjustment from 12.5%, previously presented by Inegi.

For the last quarter of last year, a moderation can be seen in economic performance, with an advance of 2.9% that contrasts with the 3.2% initially presented.

The photo of the first quarter of this year shows a growth of 1% that is lower than the 1.5% previously incorporated and finally the fall of 0.4 in the third quarter of the year.

With this quarterly advance, the economy reached an annual variation of 4.7% in GDP in the third quarter of 2021, a rate that also incorporates an adjustment with respect to that estimated by Inegi, which was 4.8 percent.

Inflation and outsourcing law leave their mark

Looking at the sectoral integration of GDP, it can be identified that the sectors that pushed economic activity down were services, specifically those that support business, with a 48.1% annual decline, this in original figures.

This collapse is attributable to the entry into force of the outsourcing law that forced companies to immediately review their hiring schemes, said the Frontier View strategist.

In the disaggregation of the information, Inegi showed that the contraction in the economy was led by tertiary activities, which had a negative quarterly record of 0.9%, which contrasts with -0.6% estimated preliminarily by Inegi.

Another factor that has affected tertiary sector activities is the impact of inflation, which did reduce the purchasing power of consumers, highlighted Iván Arias, Director of Economic Studies at Citibanamex.

According to information from Inegi, the negative performance of the services sector was not compensated in the quarter by the positive data that, on the other hand, showed the primary activities, which reached 1.3% in the quarter and that include the agricultural sector, nor by the secondary ones. of the industry, which barely achieved an advance of 0.9% quarterly.

General weakness

With timely information on GDP, Inegi estimates that in the first nine months of 2021, GDP advanced 6.4% compared to the same period last year.

The chief economist for Ve por Más, Alejandro Saldaña, explains that reading the updated information together with the two consecutive months of decline in the Global Index of Economic Activity (IGAE), confirms a general weakening in all sectors that will also have impact on next year’s performance. Thus, it maintains its GDP forecast for 2022 at 2.6 percent.

Alejandro Valerio, from Frontier View, states that the detailed information on GDP is consistent with his expectation of a growth of 5.7% for the whole year and also with his projection of 2.4% for 2022.

The Citibanamex expert anticipated that this weakness will be persistent for the remainder of the year and that we would have to achieve 2% GDP growth in the last quarter, to achieve annual growth of 5.5%, which is highly unlikely.

Saldaña emphasized that the persistence of interruptions in the supply chain, plus price pressures and weak business confidence, will continue to take their toll on investment and consumption decisions.

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