Mexico’s GDP reaches highest growth in over two years with 1.1% rise in Q3 2024

Mexico’s economy posted its fastest growth in two and a half years, expanding by 1.1% in the third quarter of 2024 compared to the previous quarter, according to INEGI, the country’s national statistics agency.

The figure slightly outpaced the 1.0% forecast by economists surveyed by Reuters, signaling that Latin America's second-largest economy is regaining momentum despite challenges.

Strong rebound in primary sector

The primary sector—comprising agriculture, fishing, and mining—led the recovery with an impressive 4.9% growth in Q3, rebounding sharply from a 0.2% contraction in the previous quarter.

This resurgence highlights the sector’s critical role in the economy, particularly amid external pressures such as volatile weather and fluctuating global commodity prices.

Meanwhile, the secondary sector, which includes manufacturing, grew by 0.9%, improving from the 0.3% recorded in Q2.

The tertiary sector, encompassing services, also grew by 1.1%, a significant improvement from its marginal 0.1% increase in the prior quarter.

Together, these sectors reflect a well-rounded economic recovery, driven by stronger industrial and service activities.

Annual growth stabilizes amid mixed signals

Despite quarter-over-quarter growth, annual growth slowed to 1.6% compared to the same period last year, down from 2.2% in the previous quarter.

However, this figure exceeded the 1.5% forecast in the Reuters poll, highlighting gradual stabilization in Mexico’s economy.

In September 2024, economic activity rose 0.3% year-over-year, decelerating from a revised 0.7% gain in August and falling short of market expectations of 0.5%.

Services growth slowed to 0.7%, while industrial output contracted by 0.4%, weighed down by declines in mining (-4.5%) and manufacturing (-2.3%).

However, agricultural activity rose by 1.2%, marking a rebound from a 2.1% decline in August.

Monthly, economic activity increased by 0.2% in September, surpassing market expectations of 0.1%, following a 0.2% decline in August.

Central bank’s strategic rate cuts

In a move to support growth, Mexico’s central bank, Banxico, reduced its benchmark interest rate by 25 basis points to 10.25%.

The unanimous decision reflects the bank’s confidence in easing inflation pressures and its intent to stimulate investment and consumer spending.

The rate cut, Banxico’s first in years, highlights its careful balancing act between fostering economic expansion and maintaining price stability.

With inflation gradually subsiding, the central bank has room to consider further rate cuts, potentially boosting domestic demand and enhancing Mexico’s growth trajectory.

Mexico’s Q3 growth offers a positive outlook for the economy, with solid performances in agriculture, manufacturing, and services. While annual growth rates have moderated, the resilience in key sectors and supportive monetary policies from Banxico provide a foundation for continued recovery.

The combination of sector-specific rebounds and strategic rate adjustments positions Mexico for steady progress in the months ahead, making it a key player in Latin America's economic recovery story.