PUERTO VALLARTA (PVDN) - The Mexican economy showed no growth in May, stagnating at a 0 percent variation compared to the previous month, according to data from the Global Indicator of Economic Activity (IGAE). This outcome fell significantly short of the 0.4 percent growth that had been projected by the Institute through its Timely Indicator of Economic Activity (IOAE).
Andres Abadia, Chief Economist for Latin America at Pantheon Macroeconomics, identified several contributing factors to the slowed economic performance, including higher real interest rates, less favorable external conditions, and a weakened labor market.
"Both internal and external risks have increased recently," Abadia said. "Remittance inflows are moderating and the US manufacturing industry is under pressure. All of these factors will hurt confidence and economic activity in the medium term."
The economic stagnation in May, when compared to the previous month, comes on the heels of a 0.4 percent contraction in tertiary or service sectors – the steepest decline seen in six months. This decline has hampered the Mexican economy despite strong performances in other areas.
Secondary or industrial activities, on the other hand, showed an encouraging 1 percent growth, the strongest such performance in 19 months. Primary or agricultural activities saw a 0.3 percent increase in May, a modest growth when compared to the 0.6 percent achieved the previous month.
On an annual basis, the IGAE also reported a deceleration in growth, from 3.5 percent in April to 3.2 percent in May, as indicated by the National Institute of Statistics and Geography (INEGI).
Despite the annual rate rebound being a welcome sign, Abadia cautioned against undue optimism, noting that activity in key sectors is losing momentum. He cited that the growth in the first half was mainly supported by decreasing inflation, broadly favorable credit conditions, strong wage growth, and ongoing infrastructure works.
This stagnation points to an uncertain future for the Mexican economy, highlighting the need for renewed strategic efforts to boost economic growth and stability.
