Mexican GDP picks up as voters prepare to judge AMLO’s party

With Mexico's election less than two weeks away, economic growth is estimated to have picked up in the current quarter. According to the daily GDP nowcast, sourced by Now-Casting Economics and available within CEIC, real GDP growth accelerated to a 2.2% year-on year pace in Q2 from 1.6% in the previous quarter.

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Official data for Q2 is scheduled for release on July 30th. Until then, CEIC users can track the daily revisions of the nowcast as more underlying data comes in. Now-Casting Economics uses a dynamic factor model to estimate economic growth in various markets.

The projected robust quarterly performance is in line with the central bank's forecast for respectable growth of 2.3% this year (albeit decelerating from 3.2% in 2023) – helped by the "nearshoring" trend that has supported manufacturing even as the higher interest-rate environment weighs on the economy. 

In addition to this nowcast, the June 2 election has prompted us to examine the economic record of outgoing President Andres Manuel Lopez Obrador. Mexico's labor market remains very strong, explaining (at least in part) why AMLO's successor as the Morena party's presidential candidate, Claudia Sheinbaum, holds a comfortable poll lead over her nearest rival.

Unemployment has hit a record low rate of 2.3%, as our next chart shows. We've added a high-frequency hiring indicator to that chart that suggests the labor market will remain healthy: a measure of weekly active online job postings broadly increased in the first four months of 2024.

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That job market is linked to the strength of manufacturing, as our chart of the monthly purchasing managers index (PMI) shows. Index values for overall PMI and its components are above 50 – indicating that the executives surveyed are expecting expansion after a dip in confidence in late 2023.

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Consumer strength is a potential cloud on the horizon. We've charted retail sales growth – which fell into negative territory on a year-on-year percentage basis in March – and a measure of daily credit- and debit-card transaction data. Steady growth in card spending post-pandemic has decelerated in recent months.

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Finally, we examine the Mexican peso, which is trading near a 9-year high against the US dollar. Our chart also adds a different measure of the currency – the nominal effective exchange rate (NEER) index, which is weighted by the importance of a nation's trading partners. (CEIC calculates this daily; we've also added the monthly NEER calculation from the Bank for International Settlements.)
The nearshoring boom's capital influx, remittance inflows from Mexicans working abroad, and Mexico's surpassing of China as the top US trading partner have all helped support the rise of the "super peso" under AMLO.

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