(Bloomberg) -- Mexico’s economy posted tepid growth in the second quarter as nearly two years of double-digit borrowing costs weighed on demand.
Gross domestic product grew 0.2% in the April-June period, matching the preliminary reading of a 0.2% rise, according to final data published Thursday by Mexico’s national statistics institute. That compares with the 0.2% median estimate of economist surveyed by Bloomberg and is up from a revised first-quarter print of 0.1%.
From a year ago, GDP expanded 2.1%, slightly lower than both the 2.2% increase in the preliminary data and the 2.2% median estimate of economists.
Mexico’s economy began to decelerate in the last quarter of 2023 after beating expectations for much of the year, and momentum has continued to grind lower. While increased government spending in the run-up to national elections in June buttressed demand, tight financial conditions and global headwinds have economists forecasting that annual output will slow for a third straight year in 2024 and for a fourth in 2025.
At its last meeting on Aug. 8, Mexico’s central bank considered the recent performance of Latin America’s No. 2 economy and judged that the loss of momentum offered space to lower interest rates for the first time since March. In a split decision, Banxico — as the institution is known — delivered a quarter-point cut to 10.75% despite revising up some inflation estimates.
In an interview with Bloomberg News afterward, Deputy Governor Omar Mejia said a prolonged slide in core inflation and the recent economic slowdown were among factors that supported the bank’s decision to cut rates.
The slowdown in the Mexican economy could continue, he said, influenced by the weakness in manufacturing in both Mexico and the US. “I believe we are going to continue to grow this year and next, but we are going to grow at a slower pace than expected.”
Last month, Grupo Financiero Base revised its annual forecast for 2024 economic growth down to 1.3% from a previous 1.6% estimate, while holding its 2025 forecast at 0.8%, according to head of economic research Gabriela Siller.
--With assistance from Jay Zhao-Murray.
(Corrects first-quarter reading in 2nd paragraph and recasts lede accordingly.)
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