- In the 2Q21, aggregate demand expanded 1.2% QoQ (23.3% YoY), its fourth consecutive quarterly growth despite setbacks in the pandemic’s evolution that have slowed its recovery.
- As COVID-19 cases were relatively low and stable during the 2Q21 and mobility improved, private consumption kept recovering at a rate of 1.9% QoQ. Compared with the previous quarter, gross investment increased only 0.5%, with private investment expanding 0.2% and public investment 2.3%.
- Government consumption increased 2.6% during the quarter, mainly driven by spending related with electoral campaigns for the mid-term elections in June 6. Regarding the external sector, exports grew 2.9% QoQ and imports increased 0.2% QoQ.
- Consumption may not recover fully until 2022 (it is still -3.2% below the 2019 average). Investment remains quite below pre-pandemic levels and its outlook is gloomier (-10.8% below the 2019 average). The economy will most likely expand more than 6.3% y/y this year, and close to 4% y/y in 2022. But growth risks remain tilted to the downside in the next years.
- Although Banco de México acknowledged the downward risks for activity, it will remain focused on the higher-than-expected inflation seen through the year. As we expect Banxico to keep hiking the target rate to about 5.0% by year-end, we see value in the middle and long sections of the nominal curve.