The economic activity indicators recently published by Inegi tell an all too familiar tale of the economy’s increasingly lethargic recovery that marks a significant deceleration compared to the rebound experienced during the first half of the year. This week we delve further into the preliminary GDP results, the latest national employment and occupation survey and the most recent monthly report of economic activity to get a better idea of where the economy may be heading for the balance of the year and through 2022.
The most recent overview came from the Global Indicator of Economic Activity (IGAE) for August 2021, which showed a seasonally adjusted 3.8% yoy increase along with a generally heterogeneous pattern of recovery. The three main industrial sectors and 19 out of 21 manufacturing branches continued to expand, even as supply chain issues continued to act as a drag on activity, something that has been especially obvious in automotive vehicle production and exports. As we mentioned, a week earlier Inegi’s preliminary GDP calculations for the third quarter showed the expansion slowing to 4.6% yoy according to original series data (a seasonally adjusted 4.8%), both of which were in line with what we had forecast but were roughly two percentage points below the consensus estimate.
In light of how several domestic and external factors that influence the recovery have evolved following the profound crisis of 2020, such a slowing is neither unexpected nor surprising. The deceleration of growth during the third quarter of 2021 was relatively foreseeable from our perspective as we have continued to project the economy will grow by only 5.8% for full-year 2021, and by 3.4% during 2022. But other analysts and financial institutions are responding to the latest figures by downwardly revising their GDP estimates by half a percentage point on average for 2021.
We expect mediocre economic growth and only a marginal firming of the labor market probably through 2022, which suggests that it will take some time before any return to pre-pandemic levels, and that is even before facing potential risks on both the international and domestic fronts.
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