Latin America Economic Data Roundup: Brazil, Mexico Remain Regional Standouts

• Fitch Solutions has raised its regional 2024 real GDP growth forecast for Latin America from 1.5% in late November 2023 to 1.6%. This increase has been almost exclusively driven by upward revisions in two markets, Brazil (from 1.4% to 1.6%) and Mexico (2.0% to 2.5%), that mask downward revisions in other markets (Argentina, Panama, Peru, etc.).
• Furthermore, these revisions track with generally disappointing economic data in the region in recent months. The Citi Latin America Economic Surprise Index fell to -12.8 in January, implying the data was worse than expected by consensus. This is also the lowest reading since January 2022 and down from 43.6 as recently as September 2023.
• Notably, the GDP-weighted aggregate shows economic activity lost steam in late 2023, suggesting the regional economy entered 2024 on a fairly weak footing.
• Notwithstanding, PMI data in Latin America is limited to Brazil, Colombia, and Mexico. However, this data shows a sharp improvement in the manufacturing sector in January, shooting above the 50.0 threshold that separates expansion from contraction.
• Furthermore, as expected, inflationary pressures moderated significantly in 2023, with the regional aggregate figure dropping below 5.0% y-o-y in June. However, in the months since the decline, prices have stagnated, with price growth remaining stubbornly above its long-term average. With prices remaining well above target across the board, Central Banks in the region will have to be judicious in implementing further rate cuts.
• Finally, the labour market remains a key point of strength in Argentina, Brazil, and Mexico. While the Q4 2023 print is likely to show a deterioration in Argentina, the latter two have benefited immensely from tight labour market conditions that have boosted private demand in recent quarters.

(Source: Fitch Solutions)