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Investing.com -- Thursday’s release of Mexico’s fourth-quarter GDP data revealed a surprising 0.6% quarter-on-quarter contraction, suggesting a potential 50 basis point reduction in interest rates to 9.50% at the upcoming Bank of Mexico (Banxico) meeting.
This outcome is now considered the most probable, barring the imposition of new US import tariffs in the near future.
The GDP figure for Q4 2024 was significantly weaker than both Capital Economics’ and the consensus forecasts, which had anticipated declines of 0.1% and 0.2% respectively. This marks the steepest decline since the third quarter of 2021.
On a year-on-year basis, growth decelerated from 1.6% in the third quarter to a mere 0.6%. The monthly IGAE activity indicator hinted at a substantial decrease in activity during October and November, aligning with an estimated 0.7% month-on-month drop in output for December.
A closer look at the sectors reveals that agriculture experienced the sharpest downturn, with a 8.9% quarter-on-quarter decrease in output. Industrial activities also suffered, dropping 1.2% over the same period.
The services sector did manage a slight uptick of 0.2%, but this was a modest gain. It is important to note that these preliminary GDP figures are based on incomplete data, especially for the month of December, and revisions could potentially adjust some of the observed weakness.
However, the current data does indicate that risks to Capital Economics’ below-consensus GDP growth forecast of 1.0% for 2025 are leaning towards the downside.
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