The Governing Board of the Bank of Mexico (Banxico) estimated that despite the recovery that national economic activity registered in the third quarter of 2024, it is likely that it will have moderated in the fourth quarter and that in 2025 the growth rate will be minor, in a scenario in which one of the main risks is related to the policies implemented by the president-elect of the United States, Donald Trump.
According to the minutes of Banxico’s last monetary policy meeting, some of the members of the Governing Board commented that the dynamism of economic activity is expected to moderate in the last quarter of the year; By sectors, the majority stated that tertiary activities continued to grow, but some highlighted that an important heterogeneity has been observed between the different areas of this aggregate.
The majority considered that the contraction of industrial activity in October indicates that it would show sluggishness in the last quarter of the year and the fall in manufacturing activity in that month contributed to this performance. Some noted that the low dynamism of manufacturing has been observed in its different subsectors. One highlighted the drop in the transportation equipment category, reflecting lower production in the automotive industry.
Another board member emphasized the negative variation in mining. Some noted that construction registered a moderate increase in October, but one considered that this sector still does not show a defined trend. He attributed the above to the fact that, internally, the lower dynamism of civil engineering works has been counteracted by greater private construction of industrial warehouses possibly associated with the process of company relocation (nearshoring).
Regarding domestic demand, the majority of the members of the Governing Board maintained that private consumption has continued to moderate. One pointed out that the slowdown in consumption has been mainly a reflection of the behavior of the goods category. The majority thought that investment remains weak.
Forecasts
In this context, some of the board members emphasized that for the following year, economic activity is expected to exhibit a more moderate pace of expansion. One noted that the expected growth for 2025 and 2026 is 1.2 and 1.8%, respectively. He recalled that these figures remain clearly below the average observed in the years prior to the pandemic, which reflects a structural weakness of the Mexican economy.
One of the members considered that the economic dynamics of next year will depend on the contrast between two elements: on the one hand, the process of fiscal consolidation, and its possible impact on both investment and consumption, and on the other, the evolution that continue to show the labor market.
Risks
Some indicated that the balance of risks for the activity continues to be biased downwards. Some warned that uncertainty for 2025 has increased mainly due to the possibility that the next United States administration will impose tariffs on goods from Mexico.
Although one considered that the risk balance is neutral. He argued that the strength in consumption dynamics could mean that growth could be greater than projected. He added that private investment shows resilience despite uncertainty and that its performance will define the dynamics of growth. In this context, he pointed out that the speed of the deceleration and its magnitude could be lower than anticipated.
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