Mexico: Economy cools somewhat in Q3, but sequential data suggest improvement
December 18, 2013
In the third quarter, GDP increased 1.3% over the same quarter last year, which marks a deceleration compared to the revised 1.6% expansion recorded in the second quarter. In addition, the print came in below market expectations of a 2.0% increase.
The slowdown in Q3 primarily resulted from slower growth in domestic demand. Growth in total consumption decelerated from a 3.3% increase in Q2 to a 2.2% expansion in Q3, reflecting weaker growth in private consumption. Conversely, government spending improved over the previous quarter. Meanwhile, gross fixed investment deteriorated sharply in Q3, contracting 3.9% (Q2: +0.8% year-on-year).
On the external front, exports of goods and services rebounded and expanded 5.6% in Q3, contrasting the 1.8% decrease observed in Q2. Imports decelerated from a 4.1% expansion in Q2 to a 2.3% increase in Q3. As a result of the improvement in exports, the external sector's net contribution to overall economic growth swung from a 1.9 percentage-point detraction in Q2 to a 1.0 percentage-point contribution in Q3.
A quarter-on-quarter comparison, however, does not confirm the slight deceleration suggested by the annual data. GDP expanded 0.8% in Q3 in seasonally-adjusted terms, which contrasted the 0.6% contraction tallied in Q2.
The Central Bank (Banxico) expects the economy to grow between 0.9% and 1.2% in 2013. For 2014, Banxico sees economic growth of between 3.0% and 4.0%. LatinFocus Consensus Forecast panelists' projection is in line with the Bank's assessment. They see the economy increasing 1.2% in 2013, which is down 0.1 percentage points from last month's forecast. For 2014, the panel expects growth to pick up to 3.5%, which is unchanged from last month's projection.
Author: Ricardo Aceves, Senior Economist