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Mexico GDP Q3 2019

Mexico: GDP slumps again in Q3 amid frail domestic demand

Expenditure-based national accounts released by the Statistical Institute (INEGI) on 23 December confirmed that output fell 0.3% in year-on-year, unadjusted terms in the third quarter, marking the second consecutive quarter of contraction (Q2: -0.9% year-on-year). Meanwhile, output stagnated in seasonally-adjusted, quarter-on-quarter terms in Q3, after having slipped 0.1% in each of the three previous quarters (Q2: -0.1% quarter-on-quarter, seasonally-adjusted).

Domestic demand remained weak in Q3, albeit to a lesser degree than in Q2. Public spending declined 2.0% year-on-year amid the government’s commitment to fiscal prudence (Q2: -2.9% yoy). In addition, fixed investment contracted for the fourth consecutive quarter, held back in large part by subdued business confidence stemming from government policy uncertainty (Q3: -6.5% yoy; Q2: -7.7% yoy). On a brighter note, consumer spending grew 0.8%, rebounding from the 0.2% slip logged in Q2 amid buoyant growth in remittance inflows and contained inflation.

Meanwhile, the external sector fared well again in the third quarter. Exports of goods and services rose a healthy 3.4% year-on-year, up from the 2.0% increase logged in the second quarter. Imports, however, slid 0.3% in Q3, likely reflecting frail domestic demand (Q2: -1.3% yoy). Taken together, net trade made a stronger contribution to overall activity than in the previous quarter.

In 2020, growth is projected to pick up modestly on firmer domestic demand, particularly on a rebound in public spending and business investment. Solid household consumption and looser monetary conditions should also support the expansion. Heavily-indebted Pemex and policy uncertainty weighing on confidence remain key risks to the outlook.

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