Recovery in Latin America steps up a gear

The past month has brought further evidence that the recovery in Latin America is picking up pace. Our GDP Tracker suggests that regional growth is now running at a three-year high of 3% y/y. The rebound has been widespread. In Brazil, a combination of lower inflation and looser monetary policy has given a boost to consumer spending. The same is true in Colombia. Meanwhile, a fiscal loosening ahead of October’s legislative elections has caused growth in Argentina to rebound, while the temporary factors that weighed on growth in Chile (a mine strike) and Peru (floods earlier this year) have begun to fade. The exception to all of this is Mexico, where there are early signs that the rise in inflation earlier this year, and the associated tightening of monetary policy, is beginning to weigh on growth. The disruption caused by this month’s large earthquake just south of Mexico City will add to the headwinds for the economy over the coming months.