Mexico GDP Q2 2018


Mexico: Economy grows in annual terms in Q2 although quarter-on-quarter data is less promising

September 20, 2018

In annual terms, expenditure-based national accounts data released on 20 September confirmed a broad-based improvement across aggregate-demand data in the second quarter. Metrics released by the Statistical Institute (INEGI) showed that the economy grew 2.6% year-on-year, up from the 1.4% expansion observed in the first quarter. Notably, aggregate supply and demand climbed 4.0% from a year earlier, just shy of analysts’ estimates. Despite the encouraging year-on-year figures, however, quarter-on-quarter and high-frequency datasets have continued to paint a far bleaker picture of the economy.

Domestic demand saw an all-around improvement in the second quarter. Household spending accelerated, ticking up to 3.0% annually (Q1: +2.6% year-on-year) and in line with the tight labor market and buoyant remittance inflows. Government spending also rose, growing 2.9% (Q1: +1.1% yoy). Meanwhile, fixed investment jumped in the quarter, expanding 3.9% (Q1: +1.4% yoy), despite the uncertainty generated in the run-up to the 1 July general election. That said, business leaders’ late-quarter embrace of the presidential frontrunner, Andrés Manuel López Obrador, may have bolstered capital spending.

On the external front, exports notched an exceptional 8.3% annual growth in the second quarter (Q1: +2.2% yoy) amid the weaker peso and healthy factory output in the United States. Along with import growth, which clocked in at 7.9% (Q1: +5.9% yoy), the external sector narrowly contributed to growth (Q2: 0.1 percentage points; Q1: minus 1.3 percentage points) in the quarter—the first time in more than a year.

Economic prospects for the second half of the year are brighter with election day in the rearview mirror. Moreover, the short-term outlook has been buoyed in recent weeks by the significant progress made in trade talks with the United States. FocusEconomics analysts see the economy growing 2.2% this year, which is unchanged from last month’s Consensus Forecast. For 2019, the economy is again seen growing 2.2%, also unchanged from last month’s report.


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Mexico GDP Chart

Mexico GDP Q2  2018 0

Note: Year-on-year changes of GDP in %.
Source: Mexico National Statistics Institute (INEGI)

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