Mexico Economic Activity November 2017


Mexico: Weakness in economic activity persists in November

January 23, 2018

Economic data remained soft through the fourth quarter, with activity in the industrial sector contracting for a sixth consecutive month in November despite robust U.S. manufacturing growth. The monthly proxy GDP figure produced by the National Statistics Institute (INEGI) showed a 1.5% expansion in annual terms in November, matching the 1.5% increase recorded in October.

Activity in the secondary sector continued to underperform in November, declining a more sizeable 1.5% in annual terms compared to the 1.1% drop observed in October. The deterioration in the industrial sector was mainly driven by a sharp contraction in construction output and the continued decline in mining activity, which more than offset a rebound in energy production. Manufacturing output growth was largely steady in November at October’s figure; it continued to be supported by strong external demand.

In contrast to the industrial sector, the service sector performed better in November, with activity increasing 2.6% year-on-year, largely keeping pace from the 2.7% increase registered in October. The figure partially reflected the strong performance by service providers that are linked to the export sector, which is benefiting from an economic upturn in the U.S. economy and solid global growth. Meanwhile, growth in the agricultural sector jumped from 3.6% in October to 8.9% in November, a 10-month high.

Month-on-month data paints a brighter picture, with economic activity growth coming at a stronger-than-expected 0.7% in seasonally-adjusted terms in November. The figure was well above the 0.2% increase recorded in October.

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 2.4% in 2019.

Author:, Economist

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