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According to preliminary numbers from Mexico’s National Institute of Statistics and Geography (Inegi), released on Thursday, Aug. 18, the nation’s economy shrank by 0.1 percent in July, constituting the third month in a row with a negative growth rate.

In June, Mexico’s economy also contracted by 0.1 percent, and in May, it contracted by 0.2 percent, based on the country’s Global Indicator of Economic Activity (IGAE)

The negative trend coincides with growing inflation, which reached 8.2 percent in July and is the highest rate in almost 22 years, since December 2000.

Given this, the Central Bank of Mexico (Banxico) raised its main interest rate from 6.5 percent to a maximum of 8.5 percent between May and last August, making bank loans more expensive and harder to obtain, which in turn leads to lower consumption and investment.

In particular, the Inegi said that activities related to services, which represent about two-thirds of the total economy, showed a decrease of 0.1 percent in July.

Meanwhile, industry, which contributes a third of the economy and is more linked to foreign trade, fell by 0.2 percent.

On Sept. 20, the Inegi is expected to announce Mexico’s IGAE for August, data that will be crucial in determining the Gross Domestic Product (GDP) of the third quarter of 2022.

If the downward trend continues in August, Mexico faces the real probability of an economic recession.


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