Mexico's economy heading for further slowdown in Q2

Given the strong correlation between Mexico's monthly supply-side proxy of growth and industrial production, the growth is estimated to have slowed substantially to 0.5% yoy in May, the weakest pace since April 2014.

The seasonally-adjusted series is expected to show a sequential decline of 0.9% mom and, barring a strong improvement in June, the economy looks set to slow further in Q2 after posting weak growth of 1.6% qoq (annualised ). 

"What it also implies is that the economy could grow below trend in 2015, presenting downside risk to the current forecast of 2.6%, unless it shows sharp improvement in H2", says Societe Generale.

Exports and investment remain crucial to manufacturing growth and the near-term growth acceleration. With the US economy expected to improve in H2, an acceleration might be in trade-led growth in Mexico.