Mexico Economic Activity December 2017


Mexico: Economic activity remains soft in December

February 23, 2018

The economy struggled to lift off in the fourth quarter, with patchy economic activity data for December showing momentum was weak despite robust growth in the neighboring United States. The monthly proxy GDP figure produced by the National Statistics Institute (INEGI) showed a 1.1% expansion in annual terms in December, which was below the revised 1.6% increase recorded in the previous month (previously reported: +1.5% year-on-year) and the feeblest expansion in three months.

The December report showed that all-important manufacturing output faltered at the end of the year, with production contracting in annual terms for the first time since last April. Mining and quarrying growth continued on a free-fall, although the decline was the smallest in half a year. Weak dynamics in mining—which includes oil output—and manufacturing were partially offset, however, by the strongest rise in construction activity since March. All in all, activity in the industrial sector declined 0.7% in year-on-year terms in December, half the 1.4% drop recorded in the previous month.

Conversely, services activity growth was weaker than in the previous month on an annual basis, with transport activity growth moderating to its lowest rate since November 2013 and wholesale trade contracting for the first time since April. Although these were partially offset by stronger growth in retail trade and financial services, activity in the tertiary sector rose 1.9% in December, a softer print than the 2.6% increase recorded in November. Growth in the primary sector was similarly weaker, at a 2.1% increase in December, below the 8.9% surge recorded in the previous month.

Month-on-month data painted a somewhat brighter picture, with economic activity growth moderating only slightly to 0.7% in December from the 0.8% recorded in the previous month. Robust month-on-month growth was the result of a strong 0.9% increase in activity in the secondary sector—the highest figure since July 2015 and a contrast to November’s 0.1% decline—mostly outweighing weaker growth in services and a plunge in agricultural activity.

The Central Bank (Banxico) expects the economy to grow between 2.0% and 3.0% in 2018 and between 2.2% and 3.2% in 2019. Our panel expects the economy to grow 2.2% in 2018, which is unchanged from last month’s forecast. Looking further ahead, GDP growth is projected to pick up to 2.3% in 2019.

Author:, Economist

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