An economic recession, according to international standards, is defined by three criteria known as PDD (Profundidad, Duración y Difusión). Profundidad refers to the magnitude of the fall from peak to trough. Duración measures the number of months of contraction between peak and trough. Difusión indicates whether the economic decline is widespread across various activities and sectors.
A popular concept, “technical recession,” mistakenly identifies a recession by two consecutive quarters with negative GDP variation. This approach fails to meet all PDD criteria, as it only considers duration while ignoring profundidad and difusión.
Mexico’s Economic Cycle Commission
In 2022, México established the Closed Cycles Economy Committee, a group of seven non-partisan experts. Their goal is to determine economic cycles (expansion and recession) using data and sophisticated measurement techniques.
IMEF Indicators Anticipating Recession
The IMEF constructs monthly indicators for manufacturing and non-manufacturing sectors based on a private survey. Known as diffusion indices, these indicators predict short-term economic trends by indicating expansion (above 50 points) or contraction (below 50 points).
- April 2024: Desaceleración
- July 2024: Debilitamiento a la vista
- September 2024: Estancamiento generalizado
- January 2025: Dirección preocupante
- February 2025: Se perfila contracción
- March 2025: Se confirma contracción
Despite government denials, demand-side conditions will likely cause the upcoming recession, not supply disruptions. The IMEF indicators consistently pointed to economic slowdown since April 2024.
While the government might try to manipulate data by including GDP expansion this year, the reality of a PDD-compliant recession is inevitable. Honesty is crucial for addressing economic challenges effectively.
