GDP in Mexico
Mexico - GDP
Lukewarm investment and exports drag on GDP growth
Expenditure-based data released by Mexico’s National Statistics Institute (INEGI) showed that GDP increased 2.0% in the third quarter, decelerating from a 2.6% expansion in the second quarter. The print was widely expected. Looking at seasonally-adjusted quarter-on-quarter data, Mexico’s GDP deteriorated and contracted 0.2% in Q2 (Q1: +0.5% quarter-on-quarter), which represented the first decrease since Q2 2013.
On the domestic front, the main driver behind the deceleration was deteriorating gross fixed capital formation. Gross fixed investment decreased 0.7% in Q3 (Q2: +0.7% year-on-year), marking the first contraction in more than two years. Souring business confidence, tighter financial conditions, the sharp depreciation of the peso and low oil prices were the main drivers behind the drop. Conversely, private consumption continues to be the key engine of domestic demand growth, and thus of overall economic growth. Private consumption accelerated its pace of expansion in Q3, on the back of still good conditions in the labor market, healthy credit expansion, gains in real wage income and a high inflow of remittances. Meanwhile, government spending increased—surprisingly—for a second consecutive quarter in Q3, even as the government remains focused on fiscal consolidation.
On the external front, a disappointing performance of exports of goods and services also dragged on overall economic growth. Exports decreased for the second consecutive time in Q3, while imports increased tepidly in the same period. Consequently, in terms of contribution, net exports subtracted 0.1 percentage points from overall economic growth in Q3, on top of the 0.6 percentage-point detraction registered in Q2.
There is wide skepticism regarding Mexico’s prospects for its external sector, and consequently for the economy as a whole in 2017. Analysts and international observers remain concerned about possible fundamental changes to the North American Free Trade Agreement (NAFTA), given president-elect Donald Trump’s campaign pledge to renegotiate the agreement. While analysts remain divided on the magnitude of the shock that renegotiating NAFTA could have on Mexico’s economy, it is clear that the current uncertainty is having an impact on growth.
In its most recent Inflation Report, the Central Bank (Banxico) trimmed its growth forecasts and now expects the economy to grow between 1.8% and 2.3% (previous estimate: 1.7%–2.5%). For 2017, the Bank expects GDP to grow between 1.5% and 2.5% (previous estimate: 2.0%–3.0%). According to the latest survey of analysts for the LatinFocus Consensus Forecast, panelists see the economy increasing 2.1% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects growth to pick up to 2.0%, which is down 0.3 percentage points from last month’s estimate.
Mexico - GDP Data
|Economic Growth (GDP, annual variation in %)||4.0||4.0||1.4||2.3||2.5|
5 years of economic forecasts for more than 30 economic indicators.
Mexico GDP Chart
Source: Mexico National Statistical Institute (INEGI) and FocusEconomics calculations.
|Bond Yield||7.43||0.57 %||Feb 16|
|Exchange Rate||20.38||0.52 %||Feb 16|
|Stock Market||47,294||0.28 %||Feb 16|
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February 9, 2017
Mexico’s Central Bank (Banxico) raised interest rates for a fourth straight meeting in February in response to a sharp weakening of the peso early this year and soaring fuel prices in January that sent inflation spiraling above the Bank’s target.
February 9, 2017
A gasoline price hike sent Mexico’s inflation soaring in January, continuing its climb above Banxico’s target rate of 3.0%.
February 1, 2017
Business activity among Mexican manufacturers improved slightly in January, but indicators continue to suggest weakness in the sector.
February 1, 2017
Given a tight U.S. labor market, a weak Mexican peso and fears about the actions that President Trump could take against migrants, remittances increased 6.2% on an annual basis, totaling USD 2.3 billion in December (November: +25.1% year-on-year).
January 27, 2017
The latest trade report brought positive news again.