MEXICO CITY (Reuters) – J.P. Morgan analysts raised their economic growth forecast for Mexico’s third quarter gross domestic product (GDP), as well as for 2022, after August trade data signaled a stronger than anticipated output from the country’s manufacturing sector.
The analysts’ forecast for the July to September period now calls for 1.5% growth, compared to an earlier estimate of 0.5%, which boosts the full year projection to 2.2% growth, from 2% previously.
This remains lower than Finance Minister Rogelio Ramirez de la O’s early September forecast 2022 GDP growth of 2.4%.
J.P. Morgan attributed the change to growing production from Mexico’s large manufacturing sector, according to the August trade data. The key sector is anchored by a massive auto assembly and production industry.
“The main source of uncertainty was manufacturing, where we’d seen mixed signals among available August data,” it said, noting that factory shipments had in fact slightly improved, adding to a small gain in July.
The analysts noted that though factory output may have jumped in the third quarter, forward-looking data has “deteriorated markedly” and that they expect factory output to eventually slow.
“We think the economy will slow as solid wage-driven private consumption is offset by increased imports and diminished external demand,” it said.
Though growth is holding up better than expected, J.P. Morgan said this could come at the cost of imbalances in external accounts, such as the trade deficit.
Mexico’s statistics agency earlier on Tuesday reported a seasonally adjusted August trade deficit of $3.6 billion, compared to a $4.4 billion deficit in July.
(Reporting by Sarah Morland; Editing by Aurora Ellis)
