Mexico 2Q GDP data, surveys point to slower economy

Market: Coal, Crude oil, Metals
02/08/24

Private-sector analysts have lowered estimates for Mexico's 2024 and 2025 gross domestic product (GDP) growth while raising inflation forecasts for both years, the central bank said Thursday.

For a fourth consecutive month, the survey's median forecasts for GDP growth in 2024 declined, with analysts polled lowering growth estimates to 1.8pc for 2024 from 2pc in last month's survey. The 2025 growth forecast slipped to 1.61pc from 1.78pc.

The shift in forecasts arrives on the heels of preliminary second quarter GDP data, posted by statistics agency Inegi 30 July, showing the economy grew by an annual 2.2pc in the second quarter, up from 1.6pc in the first quarter but slowing from 3.5pc in the second quarter 2023.

The central bank's 2024 GDP estimate was lower than a 2.4pc estimate from Mexican bank Banorte.

Median projections for end-2024 inflation in the central bank's private-sector survey for July moved to 4.58pc from 4.23pc, with end-2025 projections rising to 3.83pc from 3.76pc in the June survey.

The central bank cited higher risks to inflation from a weakening peso and a potentially severe hurricane season in its latest monetary policy decision on 27 June when it held its target interest rate at 11pc. The peso weakened above 19 pesos to the US dollar Friday for the first time since January 2023, extending the losses triggered after 2 June elections that effectively erased congressional opposition to the progressive Morena party. It has weakened from 16.3 pesos to the dollar early April, its strongest level in more than eight years.

Growth in the industrial sector grew by an annual 1.9pc in the second quarter from 0.9pc in the first quarter, while services grew by 2.7pc in the second quarter from 2.1pc in the prior quarter, according to the latest GDP report. Agriculture contracted by 2.7pc in the second quarter from 0.6pc growth in the first quarter.

"The economy's exceptional momentum in previous years may be running out of steam," said Mexican bank Banorte in a note on the GDP report.

Banorte noted uncertainty in manufacturing, "although some of the early nearshoring-related investments could begin to result into more production. In addition, the auto sector remains strong, key to driving the category forward."

The downtrend is supported by comments from ratings agency Moody's out this week, predicting a "substantial slowdown" in the second half of 2024.

By James Young

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20/12/24

Viewpoint: Copper volatility, uncertainty ahead in 2025

Houston, 20 December (Argus) — US copper prices are expected to remain volatile in 2025 because of uncertain market conditions, including Chinese demand, electric vehicle (EV) rollouts and falling borrowing costs. Following a two-year downturn prompted by China's economic slowdown in the wake of the Covid-19 pandemic, the next active price on the Chicago Mercantile Exchange (CME) hit an all-time record high of $5.106/lb on 21 May 2024. Expectations of increased demand in China, the prospect of looming US interest rate cuts, and projected ramped-up demand for copper in EVs and the green energy sector fueled copper price gains into the mid-year. These expectations proved partly exaggerated, leading copper to fall back to an average of $4.33/lb over the second half of 2024. US copper market participants expect those same factors, albeit to varying degrees, to retain a prominent role in determining prices for 2025. Macroeconomic uncertainties Suppliers and consumers widely expect volatility to persist in the global copper trade as broader macroeconomic factors — chiefly Chinese demand and stimulus, US Federal Reserve interest rate decisions — and delayed US EV ramp-up plans pull the market in diverging directions. President-elect Donald Trump's pledge to implement import tariffs have further complicated the picture for US participants, with likely retaliatory tariffs clouding the picture even more. Trade disagreements and tariffs would not only raise costs but also curb demand as the flow of various goods is dented, market sources said. Meanwhile, US Federal Reserve policymakers on 18 December signaled they are likely to cut the target rate by only 50 basis points next year, paring back their expectations from a prior 100 basis points as inflation remains sticky. The DXY dollar index, which tracks the greenback against six major currencies, surged after the Fed announcement to its highest in two years. A strong dollar puts downward pressure on copper prices because it tends to weaken demand from holders of other currencies. Tariffs are also expected to spur inflation and may prompt the Fed to further slow the pace of rate cuts, or even hike rates, effectively lending support to the dollar, making it more expensive for holders of other currencies to buy into copper. The US Dollar index, DXY, surpassed 108.2 on 19 December, the highest since November 2022. Goldman Sachs has forecast that the greenback will remain strong in the near-term. Automakers slow EV transition Although the green energy transition — generally covering solar, wind, and EV markets for copper markets — is expected to contribute to US consumption of copper, automakers have signaled their interest in delaying EV deployments. Wind and solar markets are widely expected to remain growth sectors with US projects and installations scheduled to rise next year . Still, the picture for EVs, which could ultimately contribute to copper demand heavily, is murkier. EVs utilize copper in motor coils for engines, and the cabling for charging stations among other components, and each EV requires 183 lbs of copper, nearly four times more than equivalent internal combustion engine vehicles. Several automakers, including GM, Ford and Toyota, have either delayed EV plans or shifted more towards hybrids instead this year. Price outlooks diverge Market participants broadly expect the copper market to slide into a deficit by 2026, chiefly because of growing demand from the renewable sector but until then are split on the direction of prices. The CME next active month price through November averaged $4.24/lb in 2024, up from a $3.86/lb average for the same time period in 2023. Investment bank Goldman Sachs said copper prices will average $4.61/lb for 2025, forecasting upside risk from potential further stimulus while simultaneously seeing downside risk from likely US-China trade tensions. Other financial organizations have forecast copper to range from $3.97-4.99/lb in 2025. Citigroup forecast copper at $3.97/lb, Bank of America dropped its outlook to $4.28/lb while UBS was at $4.76-$4.99/lb. Most copper traders and analysts agree that 2025 will likely be a year of transition for the red metal market, buffeted by ongoing uncertainty. By Mike Hlafka Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US government agencies set to shut down

20/12/24

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20/12/24

US government agencies set to shut down

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Viewpoint: PGM demand from hydrogen sector to rise

20/12/24

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20/12/24

Viewpoint: PGM demand from hydrogen sector to rise

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Viewpoint: More changes for Dated crude benchmark ahead

20/12/24

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20/12/24

Viewpoint: More changes for Dated crude benchmark ahead

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Trump backs new deal to avoid shutdown: Update

19/12/24

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19/12/24

Trump backs new deal to avoid shutdown: Update

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