Mexico: Economic growth regains some traction in Q4
January 30, 2018
On the back of robust demand from overseas and resilient dynamics in the domestic sector, economic growth rebounded mildly in the fourth quarter following a lackluster third-quarter performance. GDP rose 1.8% from the same period of the previous year in Q4, a moderate improvement from the sluggish 1.5% increase recorded in Q3. The figure largely met market expectations.
The fourth-quarter print largely reflected stronger services activity and a surge in growth in the primary sector. Activity in the service sector grew 2.6% in Q4, slightly above the 2.4% increase recorded in Q3. Strong momentum in external demand likely lifted export-related services, while resilient domestic spending data likely buttressed domestic service providers.
Conversely, the industrial sector continued to perform poorly in the fourth quarter, with activity in the sector contracting 0.7% in annual terms for a second consecutive quarter. Manufacturing output likely remained healthy, with Mexican firms benefiting from very solid manufacturing momentum in the United States. However, subdued public spending on infrastructure likely continued weighing on construction.
The economic picture is much rosier on a quarter-on-quarter basis, with growth snapping back from a 0.3% contraction in Q3 to a stronger-than-expected 1.0% increase in Q4. This suggests momentum is more robust than previously thought as the economy enters 2018, despite high inflation, a weak currency and heightened political noise stemming from July’s presidential elections and NAFTA renegotiations.
Author: David Ampudia, Economist