Mexico: Consumption continues supporting growth in Q2
September 21, 2016
GDP growth in Q2 virtually mirrored Q1’s result, according to data for aggregate demand and supply released by the National Statistics Institute. GDP expanded 2.5% year-on-year in Q2, which came in slightly above the 2.4% increase in Q1 and overshot the 2.1% rise the markets had expected.
Looking at the details for aggregate demand, private consumption increased 2.6% in Q2, which marked a deceleration compared to the 3.3% expansion in Q1. Government spending, on the other hand, rebounded from the 0.4% contraction observed in Q1 and expanded 1.7% in Q2. Gross fixed investment continued to perform poorly and in the April-June period it again showed a lackluster 0.6% expansion. This continued to reflect that solid growth in private investment offset a deterioration in public investment due to low oil prices.
Export growth continued to moderate in the second quarter, rising 0.6% year-on-year (Q1: +1.4% yoy) and marking the slowest pace of expansion since Q1 2013. The deceleration reflected considerable headwinds from slower global demand and low commodities prices. Meanwhile, the fact that private consumption weakened and investment remained tepid prompted imports to decelerate sharply in the second quarter (Q2: +0.8% yoy; Q1: +2.1% yoy), yielding a net external drag of 0.1 percentage points on overall GDP growth in Q2.
Looking at seasonally-adjusted quarter-on-quarter data, Mexico’s GDP deteriorated and contacted 0.2% in Q2 (Q1: +0.5% quarter-on-quarter), which represented the first decrease since Q2 2013.
Author: Ricardo Aceves, Senior Economist