In reactivation, investment exceeds private consumption

Last August, the country’s domestic demand experienced two realities. On the one hand, private consumption in the domestic market contracted 0.6% monthly in what was its third month in a row with setbacks; but on the other, gross fixed investment grew 1.1%, which linked two months of increases, according to seasonally adjusted figures reported yesterday, November 8, by the National Institute of Geography and Statistics (Inegi).

“The performance of this component of aggregate demand (fixed investment) was very outstanding, since the economy as a whole had a drop of 1.6% m / m, while the other two main components of aggregate demand had contractions of 0.6 % in the case of consumption and 1.6% in that of exports, ”Marcos Arias, an analyst at Grupo Financiero Monex, commented in a report.

In the case of consumption, the poor performance in August was due to falls in its two components. On the one hand, the purchase of domestic goods and services fell 0.1%, while that of imported goods contracted 6.8% (its biggest drop since April 2020, when it sank 18.1 percent).

“The weakness of consumption is emerging as one of the main factors behind the fall of 0.2% in GDP in the third quarter, as investment and exports have had better results,” said Arias Novelo in another report.

And he said that this month’s stumble occurred in the context of the peak in contagion and mortality statistics due to the third wave of Covid-19 in Mexico, “although it could also be affected by the effects that were affected in the economy after the implementation of the reform on outsourcing ”.

The latter had the effect of increasing formal employment registered with the IMSS, but reducing overall employment in the service sector, according to data from Inegi.

Meanwhile, behind the 1.1% monthly advance in fixed investment, a significant reactivation of the construction sector is observed, as capital spending in this item grew 3.2% per month, while spending on machinery fell 1 percent.

During the first eight months of the year, fixed investment has grown 12%, exceeding the reactivation of private consumption, which has risen 8.7% during the same period; However, investment came from suffering a drop of 20.5% in 2020, while consumption fell 12.4 percent.

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