The 2Q24 GDP flash estimate, published by Mexico’s statistics institute (INEGI), came in at 2.2% yoy, below market consensus of 2.4% (as per Bloomberg) but above our call of 1.9%. The annual figure was supported, in part, by a favorable calendar base effect (Easter holidays). In fact, according to calendar & seasonally adjusted data reported by INEGI, GDP in 2Q24 grew at a softer pace (1.1%) than the regular series. At the margin, GDP expanded at a weak 0.2% qoq/sa (after expanding at a similar pace in the 1Q24: 0.3%), reflecting a soft industrial and services sectors which both stood at 0.3%, while the primary sector fell by 1.7%. The quarterly GDP flash estimate for the 2Q24 implies the monthly GDP for June fell by around -0.1%, after rebounding in May with an expansion of 0.7%.
Our view: Today’s economic release is consistent with our below consensus GDP growth call of 1.6%. We think the market consensus (Citibanamex survey), currently at 1.9%, will likely be revised down after these figures. A softer activity outlook, despite an expansionary fiscal stance, could make most Banxico board members more comfortable with services inflation trending down more clearly in the near future, supporting a rate cut in the August 8 meeting. Our base scenario is for a 25-bp rate cut.
