Macro Analysis /

Timely Indicator of Economic Activity – Signs of moderation at the start of 4Q22

  • September’s estimate was revised up to 0.1% m/m (4.8% y/y sa), with additional strength in services

  • October’s figure came in also at 0.1% m/m (5.0% y/y sa), with both industry and services advancing

  • Results signal that 3Q22 GDP could stand at 0.9% q/q (4.0% y/y nsa), while activity would moderate in 4Q22

Juan Carlos Alderete Macal
Juan Carlos Alderete Macal

Director of Economic Research

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

18 November 2022
Published byBanorte
  • Today, INEGI released its Timely Indicator of Economic Activity (IOAE, in Spanish) for October, as well as revised estimates for September 

  • September’s estimate was revised up relative to the preliminary figure, now at 0.1% m/m, (4.8% y/y sa) with a better-than-expected result in industry (despite its contraction) and additional strength in services 

  • October is also expected at +0.1% m/m (5.0% y/y sa). While both industry and services would improve, the former is likely related to a base effect –as early figures suggest some weakness–, while the latter does look more resilient 

  • With the revision, figure points to a downward revision in GDP vs the preliminary print in 3Q22 towards 0.9% q/q (+4.0% y/y). After this, we believe signals for the last quarter are consistent with our view of a moderation due to increased headwinds

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.

Slightly lower GDP in 3Q22, with a moderation ahead. INEGI released its Timely Indicator of Economic Activity (IOAE in Spanish). With September’s revision, 3Q22 GDP would be revised to 0.9% q/q (+4.0% y/y), slightly lower than the 1.0% of the preliminary release. In our view this is still positive, given prevailing risks both abroad and domestically. After this, and considering October’s forecast, activity will likely moderate in 4Q22, consistent with our view of increased weakness in US demand (given tighter monetary conditions) and with domestic consumption affected by inflationary pressures.

Improvement in September... The revised print came in at +4.8% y/y (range: 3.6% to 6.1%), 155bps higher than the previous estimate (sa). In sequential terms, this implies +0.1% m/m (previous: 0.0%). Services would maintain some upward momentum at +0.1%, while industry fell marginally (-0.2%), showing broad weakness. Therefore, –and based on our calculations– activity in the month would have grown 4.8% y/y (nsa).

…with October moderating. The estimate stands at +5.0% y/y (range: 3.6% to 6.4%), which translates also into +0.1% m/m. Industry would rebound marginally (+0.1%) –in our view mostly because of a favorable base effect, as early data continues to suggest some weakness–, while services would continue recovering at +0.1% –more in line with timely figures from other indicators, such as IMEF’s non-manufacturing PMI and ANTAD sales. Therefore, we estimate 4.7% y/y in the period (nsa).