Mexico Economic Activity July 2017


Mexico: Economic activity takes a hit in July

September 22, 2017

The monthly proxy GDP (IGAE) produced by the National Statistics Institute (INEGI) expanded 1.0% in annual terms in July. The reading marked a notable deceleration from the 2.4% expansion recorded in the previous month, but came in slightly above expectations of a 0.7% increase.

The weaker print reflected a bleak industrial sector, which contracted 1.6% in annual terms in July (June: -0.3% year-on-year). Although manufacturing output seems to be back on its feet, construction output decreased markedly in the month, likely the result of subdued public spending on infrastructure. Meanwhile, the services sector expanded at a slower clip in July amid incipient signs that private consumption might be slowing, which weighed on domestic-oriented services activity. Growth in the agricultural sector was steady at June’s 2.0%.

On a monthly basis, economic activity eased 0.7% in seasonally-adjusted terms in July, a contrast to June’s 0.6% increase. This leaves activity off to a weak start to the quarter, which is particularly worrying at a time when the recent earthquakes that have devastated the country are likely to have dented economic activity in the last month of Q3.

The Central Bank (Banxico) expects the economy to grow between 2.0% and 2.5% this year. Next year, the Bank sees economic growth at between 2.0% and 3.0%. Our panel expects the economy to grow 2.1% in 2017, which is up 0.1 percentage points from last month’s forecast. Going forward, GDP growth is projected to pick up to 2.2% in 2018, which is unchanged from last month’s estimate.

Author:, Economist

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