Mexico: Economy contracts year-on-year in Q2 but avoids technical recession
The economy contracted for the first time since late 2009 in the second quarter, according to a preliminary GDP estimate released by the Statistical Institute (INEGI) on 31 July. Economic activity fell 0.7% in year-on-year, unadjusted terms in Q2, contrasting the 1.2% expansion logged in the first quarter. That said, seasonally-adjusted quarter-on-quarter output rebounded in Q2, beating market expectations and thus avoiding slipping into a technical recession (Q2: +0.1% quarter-on-quarter s.a; Q1: -0.2% qoq s.a).
The second-quarter slump reflected a broad-based deterioration across the major sectors of the economy. Industrial-sector output declined for the third consecutive quarter and at the sharpest pace since Q4 2009 amid the ailing construction and mining sectors (Q2: -2.8% year-on-year; Q1: -0.7% yoy). Meanwhile, output in the services sector slowed considerably and rose only a meager 0.1% year-on-year (Q1: +1.9% yoy), in part weighed on by declining consumer confidence. Lastly, agricultural production also lost significant pace, growing just 1.4% in annual terms (Q1: +5.8% yoy).
Commenting on the outturn and near-term outlook, economists at HSBC México, noted:
“[The] results showed that services remain as the main source of growth, while industrial production continues to disappoint. After service sector activities cooled off in the first months of the year, they gained positive momentum towards the end of Q2, which may prove supportive for overall activity in the coming months. Meanwhile, industrial activity is likely to underperform in the remainder of 2019 on the back of a deteriorated outlook for mining and construction. Recent readings suggest that the eventual recovery of industrial activity could prove more gradual than originally expected”.
The INEGI will release a second GDP estimate on 23 August.