(Bloomberg) — Mexico’s economic growth accelerated more than expected in the third quarter on solid domestic demand and a recovery of the agriculture sector, marking a pace that’s unlikely to be sustained going forward.
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Gross domestic product expanded 1% in the three months through September, above the 0.65% median estimate of economists surveyed by Bloomberg. From a year ago, GDP grew 1.5% in the quarter, more than the 1.3% median estimate, but less than the 2.1% the previous period, according to preliminary data published Wednesday by Mexico’s national statistics institute.
Domestic demand has been a boon for the 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.
What Bloomberg Economics Says
“We expect activity to continue rising into 2025, but annual growth to slow after strong gains in previous years. Nationalist government policies and waning public-sector investment are headwinds. Falling interest rates provide some relief, but monetary conditions remain tight. Uncertainty about the US election is a drag.”
— Felipe Hernandez, Latin America economist
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After drought-related shocks dissipated, agriculture expanded 4.6% in the quarter, while manufacturing and services grew 0.9% each, according to the national statistics institute.
The figures showed a solid, broad-based increase in real activity in the third quarter on buoyant services activity and firmer industry, said Alberto Ramos, chief Latin America economist at Goldman Sachs Group Inc.
Monetary conditions are slowly being loosened, providing some relief. Banco de Mexico lowered borrowing costs by a quarter-point for a second straight month at its September meeting, to 10.5%.
‘Limited’ Optimism
Looking ahead analysts are still forecasting that Latin America’s second-biggest economy will slow for a third straight year in 2024 and yet again in 2025.
While the central bank has reduced the benchmark interest rate twice in a row, it remains in double digits. Headline inflation sped up to 4.69% in early October, above the bank’s 3% target.
