Bloomberg: Mexico's economy rebounds more than expected

Mexico's gross domestic product (GDP) expanded 1.5% in the second quarter compared with the previous three months, rebounding from a 0.6% contraction in the first quarter, Bloomberg reports, citing preliminary data released by the national statistics institute.

The report said the quarterly growth exceeded the 1.4% median forecast of analysts.

On an annual basis, the economy grew 2.2% in the April-June period, surpassing analysts' expectations of 1.6% and accelerating from the revised 0.1% year-on-year growth recorded in the first quarter.

Exports remained the main driver of the recovery, reaching a record high despite prolonged trade tensions with the United States. In June, exports surged more than 34% from a year earlier, helping Mexico post a $4.09 billion trade surplus, nearly double the level recorded in the same month last year.

The stronger export performance has helped offset a 19-month decline in gross fixed investment, which came to an end in April, supported by increased government spending.

Last month, Mexico's central bank ended a nearly two-year cycle of interest rate cuts despite inflationary pressures linked to the conflict in Iran. Policymakers have since indicated that it would be appropriate to keep the benchmark interest rate unchanged at 6.50%.

President Claudia Sheinbaum has introduced a range of measures aimed at encouraging private investment, including tax incentives and faster investment approval procedures. However, those initiatives have yet to produce significant results, leaving the economy heavily reliant on exports, most of which are destined for the U.S. market.

Last week, Mexican and U.S. officials held a third round of talks in Mexico City on the U.S.-Mexico-Canada Agreement (USMCA), which is currently undergoing its annual review process.

During the negotiations, Washington reportedly urged Mexico to align with U.S. tariffs on Chinese steel and aluminium by imposing similar duties on imports from outside North America.

Although Mexican exports continue to benefit from preferential access to the U.S. market under the USMCA, President Donald Trump has repeatedly questioned the future of the trade pact, saying he does not want to renegotiate it despite previously describing it as one of the signature agreements of his first administration.

By Bakhtiyar Abbasov