• Output expanded 0.1% in fourth quarter from previous quarter
  • Mexico has held out against region rate-cutting trend

Mexico’s economy barely grew in the fourth quarter, bolstering the chances that the central bank will join the regional trend for interest rate cuts as soon as next month.

Official data released Thursday showed gross domestic product expanded 0.1% in the October-December period compared to the previous quarter, as manufacturing and construction activity contracted. The result was in line with the median estimate of economists surveyed by Bloomberg.

From the same period a year earlier, GDP grew 2.5%. For the whole year, output expanded 3.2%.

Mexico is the only major inflation-targeting economy in Latin America that has yet to start cutting interest rates, and a benchmark interest rate at 11.25% is constraining consumer demand. The weak growth, combined with a bigger-than-expected drop in the inflation rate this month, should allow the central bank to start monetary within weeks, said Alberto Ramos, chief Latin America economist at Goldman Sachs.

“Softer growth and progress on the inflation front should allow the central bank to cut a quarter percentage point in March,” Ramos said. “More likely we are now shifting to a path of more moderate growth.”

The agricultural sector shrank 0.1% in the fourth quarter, as did the secondary sector that includes manufacturing and construction, as government spending on some major projects started to slow. The services sector grew 0.3%, compared to much more robust performance earlier in the year.

Economists in the most recent Citibanamex survey see Mexico’s GDP expanding 2.4% in 2024 and 1.9% in 2025.

“This is evidence of strong economic deceleration toward the end of the year, and the trend doesn’t look like it’s going to change,” said Gabriela Siller, director of economic analysis at Grupo Financiero Base, speaking before the report was published.

In a seperate report on Thursday, the statistics agency said that annual inflation slowed to 4.45% in early February, a bigger drop than forecast by all 23 analysts surveyed by Bloomberg.

Mexico is heavily dependent upon the US — its No. 1 trade partner and the source of much of the cash that immigrants send home — and presidential elections in both countries this year introduce a host of political variables to economic forecasts.

Written By:  — With assistance from Rafael Gayol @Bloomberg

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