The economy took a breath in July. It grew 0.4% per month, according to IGAE

The economy took a breath in July.  It grew 0.4% per month, according to IGAE

Data published by the National Institute of Statistics and Geography (Inegi) revealed that economic activity in Mexico took a breath and returned to monthly growth in July, after two consecutive months of decline.

In the seventh month of the year, the Global Activity Index (IGAE), which monitors the development of the economy on a monthly basis, recorded a monthly growth rate of 0.4%, with seasonally adjusted figures.

With this, the Mexican economy resumes its recovery after it showed a contraction of 0.2 and 0.3%, respectively, in May and June.

Although the economy showed improvement compared to the month, analysts stressed that it remains below pre-pandemic levels. In addition, a recession is expected in August, according to data from the Index of Economic Activity (IOAE).

โ€œThe data is in line with the IOAEโ€™s estimate and sets a good precedent for GDP growth in the third quarter, as it significantly reduces the chances of seeing a downturn as is happening in other parts of the world,โ€ stressed Marcos Daniel Arias, a Monex analyst.

Average growth is 2.1% as of September

In this sense, Gabriella Seller, director of economic and financial analysis at Banco Base, explained that taking into account the IOAE estimate for August, and assuming it maintains the same level during September, GDP will show an annual growth of 2.56% and one of 0.16% in the quarter third of this year.

With this, the GDP for the first three quarters of the year will show an average growth of 2.1% compared to the same period last year.โ€

According to the forecasts of the Ministry of Finance and Public Credit (SHCP), Mexico will show growth of 2.4% this year. The forecast is slightly higher than the recently revised rate by the Organization for Economic Co-operation and Development (OECD), of 2.1%, which was corrected up from 1.9% previously.

โ€œBased on todayโ€™s result, the economy is slightly higher (+0.84%) than the volume of production for 2017, but at the same time it is 1.78% lower than the maximum it was before the crisis (113.6 points), so it is important to consider that the recovery context will continue In favor of rapid progress. However, it is also a fact that the outlook has turned bleak with the wear and tear of high inflation and war-related uncertainty in Ukraine for several months, which makes us doubt the momentum will continue,โ€ added Monex analyst.

The best-behaved agricultural sector

According to the data provided by Inegi, the primary sector, which includes agricultural activities, was the sector that exhibited the best behavior during the month of July, showing the largest growth.

In the seventh month of the year, primary sector activities showed a monthly growth of 0.8%; However, the expansion is less than the contraction reported in the previous month, at 6.0 percent.

Alejandro Saldana, Deputy Director of Economic Analysis at Ve por Mรกs (Bx +), indicated that the good performance of this sector is due to the recovery that occurred in the export sector in the same month, with a rate of 17.9%.

Advances in industries and services

As in other months, both the secondary and tertiary sectors, comprising industries and services, respectively, showed progress in the monthly comparison, and continued their recovery path.

Secondary activities showed a growth of 0.4%, the fifth consecutive increase. Driven by the manufacturing industry, which recorded a growth of 1.6%, the highest rate since December 2020 when it recorded 2.0%.

In the case of university activities, the monthly growth in the seventh month of the year was also 0.4 percent. Here, the highest rate is observed in cultural and sports entertainment services, as well as other recreational services, with a growth of 4.1 percent.

However, Alejandro Saldana emphasized that this is the only economic activity that is still below pre-crisis levels, at 2.7%, given that many Mexicans have not yet resumed the activities they used to do before the pandemic.

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