Mexico’s Economic Activity Beats All Forecasts Led by Services

Economic activity expanded 4.4% in annual terms during January as the country benefits from nearshoring boom, foreign investment

(Bloomberg) — Mexico’s economic activity beat all estimates in January, expanding at the fastest annual pace in five months as the country continues to recover more quickly than expected.

Activity in Latin America’s second-largest economy grew 4.4% compared to the previous year, Mexico’s statistics institute said on Friday. The result exceeded all estimates by economists in a Bloomberg survey, which had a median growth forecast of 3%. On a monthly basis, activity increased 0.56%.

After taking a hit during the pandemic, the Mexican economy is benefiting from stable macroeconomic conditions and growing investment, including the relocation of industrial projects, a process known as nearshoring. Inflation, which reached its highest level in more than 20 years in September, has been slowing after an aggressive cycle of monetary policy tightening.

What Bloomberg Economic Says

“Stronger-than-expected activity in January supports our constructive outlook for the Mexican economy. Results point to robust household consumption extending its uptrend and supporting growth. Data are consistent with increasing exports. They also provide evidence of Mexico attracting investment and benefiting both from US demand and changes in global supply chains.”

— Felipe Hernandez, Latin America economist

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Read More: Mexico’s Slowing Inflation Brings Some Respite to Banxico

In January, the services sector expanded 5.6% from a year earlier, while industrial activity grew 2.8%, according to the official data. 

–With assistance from Robert Jameson.

(Updates with Bloomberg Economics comments after third paragraph.)

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