Macro Analysis /

Mexico: Timely Indicator of Economic Activity – Better signs in 2022

  • January’s forecast improved to 0.5% m/m (1.6% y/y sa), supported by industry but with services still negative

  • February’s estimate implies 0.3% m/m (2.8% y/y sa), reflecting a reactivation in domestic demand, especially in services

  • These results suggest resiliency. However, some risks prevail, including price pressures and supply chain disruptions

Juan Carlos Alderete Macal
Juan Carlos Alderete Macal

Director of Economic Research

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

22 March 2022
Published by
  • Today, INEGI released its Timely Indicator of Economic Activity (IOAE, in Spanish) for February, as well as revised estimates for January 

  • January’s forecast improved vs. preliminary figures, now at 0.5% m/m, (1.6% y/y sa figures). The increase would be supported by industry, albeit with services negative 

  • For February, they expect 0.3% m/m (2.8% y/y sa), in line with timely figures for the same period that reflect a reactivation of domestic demand 

  • Estimates are consistent with some resiliency at the beginning of the year despite a relatively adverse backdrop. Nevertheless, some elements could weaken this pace, including higher price pressures and the continuation of supply chain disruptions

This indicator is an effort by INEGI to forecast the monthly GDP-proxy IGAE five weeks in advance, which is very valuable. It is constructed through nowcasting methods, based on econometric models –which in turn rely on forward-looking high-frequency data to anticipate economic activity. By construction, INEGI publishes confidence intervals for these estimates; nevertheless, we focus only in the midpoint of these ranges.

The year begins with growth despite a difficult backdrop. INEGI released its Timely Indicator of Economic Activity (IOAE in Spanish). With revised data for January, it would be confirmed that activity withstood the impact of ‘Omicron’ contagions despite implying work absenteeism and lower mobility –although at a lesser extent than in previous waves–. However, we think activity remained impacted by other factors, including price pressures. This, along problems in supply chains that could jeopardize the evolution of economic activity going forward. Despite of this, we believe there are other favorable factors that could compensate, so we maintain our full-year GDP estimate at 2.4%.

Resilience in January… The revised figure stood at +1.6% y/y (range: 0.5% to 2.8%), 91bps above the first estimate (sa). In sequential terms, this implies a 0.5% m/m expansion (previous: -0.1%). The boost was mainly on industrial production strength. However, services would be negative, now expected at -0.2% m/m (previous: 0.0%) Considering these figures –and according to our calculations– activity would have grown 0.5% y/y nsa.

…with positive signals in February. The estimate is +2.8% y/y (range 1.1% to 4.6%), implying +0.3% m/m. Industry would come in at -0.2% m/m, possibly with some payback after the strong increase of the previous month. Services would be better at +0.6%, with timely data suggesting a greater reactivation of domestic demand (e.g. IMEF’s PMIs, ANTAD and AMIA sales, among others). Thus, we estimate the period’s activity at 3.1% y/y (nsa).