Friday, December 8

‘Slow drag’ from US to Mexico

Very early on Monday, INEGI will release the timely estimate of Mexico’s GDP for the fourth quarter of 2021.

The available information suggests that economic activity in the country stagnated in the October-December period or even had a quarterly decline.

Analysts from some financial institutions anticipate that in the fourth quarter of the year just ended, the Mexican economy recorded a quarterly contraction of between 0.1 and 0.5 percent.

It must be remembered that in the period July-September 2021, economic activity contracted 0.4 percent at a quarterly rate.

If GDP also contracts in the fourth quarter, Mexico would have fallen into a ‘technical recession’, which is when there are two consecutive quarters with decrease.

The weakness registered in the second half of 2021 is worrying, still without the effect of the spread of the omicron variant.

The approximate measurement of the monthly GDP of November, which is the Global Indicator of Economic Activity (IGAE), despite the fact that it grew 0.3 percent after three months of decline, directs the economy to have a negative behavior in the fourth quarter.

Above all because the IGAE was below the growth anticipated by the Timely Indicator of Economic Activity (IOAE), which suggested a monthly advance of 0.6 percent in November.

The IOAE, which shows estimated figures for the past two months and is generally very accurate, anticipates that the IGAE would have stagnated in December.

Although the IOAE is one of the most timely indicators in the context of uncertainty about the outlook for our economy associated with the pandemic, it is better not to jump to conclusions and wait for Monday.

Regardless of whether the opportune GDP confirmed the technical recession ‘sung’ by some analysts, the economy mexican will have grown about 5 percent in everything 2021.

It may be a little less or a little more than 5 percent, but Mexico’s economic growth will have several components.

The most important is the one provided by the ‘statistical rebound’, after the 8.2 percent GDP collapse in 2020, the deepest in almost nine decades.

Then there is the growth coming from the US ‘drag’ and the internal capacity of our country to grow.

But Mexico seems to be “decoupling” from US growth, at least in this business cycle, BofA Securities noted in a recent report.

One possible explanation is the different mix of fiscal and monetary policies followed by the two countries, adds the investment bank.

In the US, fiscal stimuli have been large, unlike in Mexico, where government almost did not implement measures aimed at supporting the economy.

President López Obrador’s argument was not to follow the “neoliberal recipe” of contracting debt to rescue business or financial corporations.

BofA Securities’ comment on the possible ‘decoupling’ makes perfect sense, since economic activity in the US accelerated its dynamism during the fourth quarter of 2021, growing 6.9 percent at an annualized rate.

in all 2021 the american economy posted growth of 5.7 percent – ​​its best performance since 1984 – and made a full recovery after the 3.4 percent drop in 2020 caused by the pandemic.

While economic activity in the US accelerated its rate of expansion in the fourth quarter, in Mexico it would have been practically stagnant.

All expectations, including those of the IMF, anticipate that both economies will face a slowdown associated with concerns about the impact of the omicron wave on economic activity.

In this business cycle It is key that the Mexican economy does not detach itself of growth from US, which will allow it to benefit from the ‘drag effect’ of the recovery of its main trading partner.