- On Friday (22/11), INEGI published GDP and inflation figures for 3Q24 and the first two weeks of November, respectively.
- INEGI confirmed that the Mexican economy expanded by 1.1% QoQ in 3Q24, an annual growth rate of 1.6%. From its preliminary estimate, the reading was revised slightly higher by 0.1 percentage points.
- The recovery in 3Q24 was broad-based across the primary, secondary and tertiary sectors. Agriculture rebounded sharply during the quarter (up 4.9% QoQ, 3.7% YoY) as rainfall conditions improved following severe droughts during the first half of the year. Industrial production rose by 0.9% QoQ (0.4% YoY), supported by manufacturing. Finally, services expanded 1.1% QoQ (2.1% YoY), driven mainly by mass media, retail sales, real estate services, transport and education.
- November’s biweekly inflation was 0.37% FoF, below market consensus (0.48% FoF) and our forecast (0.55% FoF), pushing annual inflation to 4.56%. Core inflation was 0.04% FoF, moderating to 3.58% YoY, the lowest annual print since May 2020.
- The two main drivers of the downward surprise were a sharp decline of -0.37% FoF in non-edible goods prices ahead of the “Buen Fin” sale days and stable agricultural prices in a context where our wholesale price monitors suggested an increase.
- Our fundamental outlook anticipates that activity will continue to perform below its potential, while disinflation will continue to trend towards Banxico’s variability range. As a result, Banco de México will gradually cut the monetary rate in coming quarters. Our fundamental scenario is consistent with a monetary rate between 7.5% and 8% by the end of 2025.
- In this context, we stand pat on our preference for the 2-5Y tenors of the MBono curve and continue to expect further steepening of the 2-10Y slope in the coming quarters as the easing cycle progresses. We are also maintaining our cautious stance on the MXN. We expect the USDMXN to reach levels around 21.0 in the short term, with high volatility, before stabilising at around 19.50.