Mexico: Growth moderates in the third quarter amid fading base effect
November 22, 2010
In the third quarter, gross domestic product (GDP) increased 5.3% over the same period last year. The figure came in below both the second quarter's 7.6% expansion as well as market expectations, which had the economy growing 5.7%. Simultaneously, the statistical institute (INEGI) revised its growth estimates for the previous quarters, which now show a 6.1% contraction in 2009 (previously reported: -6.6% year-on-year). At the sector level, the deceleration was the result of slower growth in industry and services, which together represent the lion's share of the economy. Growth in the industrial sector slowed to a 6.2% expansion (Q2: +7.9% yoy), while growth in the services sector, which accounts for nearly two thirds of the total economy, moderated to 4.2% (Q2: +7.5% yoy). Agriculture was the only component that improved, accelerating from a 5.0% increase in the second quarter to an 8.9% expansion in the third quarter. The marked deceleration also reflects, in part, the fading of a favourable base effect that boosted growth in the previous quarter; the second quarter last year marked the trough of the crisis (Q2 2009: -9.6% year-on-year; Q3 2009: -5.5% yoy). That said, a quarter-on-quarter comparison suggests that growth is weakening. The economy rose grew 0.73% over the previous quarter, which represents only a fraction of the previous quarter's robust 2.30% expansion (previously reported: +3.22% quarter-on-quarter seasonally adjusted). Amid weaker growth in the United States, Mexico's most important trading partner, and the gradual fading of the favourable base effect, GDP growth is expected to moderate in the coming quarters. Currently, the Central Bank anticipates the economy to grow 5.0% this year and between 3.2% and 4.2% in 2011.