Macro Analysis /
Global

Timely Indicator of Economic Activity – The recovery likely continued in 2Q22

  • April’s forecast improved to 0.8% m/m (1.3% y/y sa), with a positive surprise in industry and services also higher

  • For May, the estimate is at 0.1% m/m (1.0% y/y sa), with a moderation but industry and services still positive

  • We expect the pace of activity to have moderated in 2Q22, albeit still positive

Juan Carlos Alderete Macal
Juan Carlos Alderete Macal

Director of Economic Research

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

Banorte
21 June 2022
Published by
  • Today, INEGI released its Timely Indicator of Economic Activity (IOAE, in Spanish) for May, as well as revised estimates for April 

  • April’s estimate was revised upwards relative to the preliminary figure, now at +0.8% m/m, (1.3% y/y sa). This is explained by a positive surprise in industry, with services also higher 

  • For May, they expect +0.1% m/m (1.0% y/y sa). This implies a moderation and is consistent with timely figures that suggest headwinds –such as more supply chain disruptions and inflationary pressures– are limiting the expansion 

  • In our opinion –and according to the forecasts– the pace of activity would moderate in the second quarter. Nevertheless, it would manage to stay positive due to solid fundamentals and some dynamism in industry

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 recovery will likely continue in 2Q22. INEGI released its Timely Indicator of Economic Activity (IOAE in Spanish) which showed that activity continues to be resilient, albeit with a more modest pace. Specifically, the beginning of the second quarter was favored by the acceleration in industry –with strength in manufacturing–, despite persistent headwinds. Services also showed a promising performance, with better signs in tourism and other leisure activities on higher mobility and the holiday period. However, we maintain some caution about the pace towards the middle of the quarter, highlighting that industry may face external challenges, triggering higher volatility in inventories and more supply chain disruptions due to international trade. Lastly, we believe inflationary pressures could influence the recovery in services.

Upward revision in April… The revised figure came in at +1.3% y/y (range: 0.1% to 2.4%), -58bps vs the first estimate (sa). Nevertheless, in sequential terms it implies +0.8% m/m (previous: +0.4%). We note that industrial production accelerated, surprising higher. Services also had a positive adjustment, coming in at +1.0% m/m (previous: +0.4%). Hence, –and based on our calculations– activity would have grown 0.6% a/a (nsa).

…while moderating in May. The estimate stands at +1.0% y/y (range: -0.9% to 3.0%), which translates to +0.1% m/m. Industry is still seen to the upside at 0.2% m/m. Services would also be positive, with a more marginal advance of 0.1%. With this, we estimate a 2.0% y/y (nsa) expansion.