Nowcasting Mexico

After years of economic strength, Mexico's economy is steadily slowing. On Sept. 2, the nation's central bank downgraded its gross domestic product forecasts for the fifth time this year. It now expects the economy to expand 1.6% in 2024, down from the 2.4% estimate in the first quarter.

What's driving the deterioration? Partly, Mexico's deep links with its northern neighbor. US "nearshoring" had benefited Mexico for years, but as the Federal Reserve's rate cycle finally cooled the American economy, export-oriented factories south of the Rio Grande slowed too. Mexico's exports to the US shrank to USD 40 billion in June -- USD 6 billion less than in May and USD 2 billion less than a year earlier.

CEIC offers daily Mexican GDP estimates from Now-Casting Economics, enabling our users to "predict the present" ahead of official data releases. This timeliness is noteworthy given the delays before official data is published; June is the most recent month for Mexican manufacturing statistics.

As our primary chart shows, the daily nowcast slowed markedly in August, nearing zero economic growth at one point.

Nowcasting Economics estimates that GDP is growing at a 0.8% year-on-year pace in 3Q and will pick up to a 1.3% pace in 4Q. However, both figures are weaker than the quarterly paces of 1.4% and 1.6%, respectively, expected by the central bank.

This nowcast uses various indicators in its model. The factors having the most negative impact at the moment are installed capacity and US manufacturing. By contrast, variables related to domestic demand in Mexico are more positive, likely reflecting increased government spending.

Our final table breaks down recent trends in different Mexican industries. Mining is a major drag on overall industrial production; construction is still in positive territory but has sharply slowed.

If you are a CEIC user, access the story here.