Mexico: Growth slides in Q3 amid sluggish consumer spending and natural disasters
October 31, 2017
The economy lost steam in the third quarter, growing a sluggish 1.6% in annual terms. The result undershot market expectations of a 1.8% expansion and was below Q2’s revised 1.9% increase (previously reported: +1.8% year-on-year). The National Statistics Institute (INEGI) revised the base year for national accounts data from 2008 to 2013, which has resulted in some upward revisions of historical GDP data.
The third quarter print was mainly the result of more subdued activity in the services sector, which nevertheless continued to be the driver of growth. Service-sector activities grew 2.4% annually, the slowest pace since Q3 2014. High inflation has likely eroded household spending; however, robust spending by tourists is buffering the slowdown. In addition, two earthquakes that hit the country in September likely dampened services spending.
Conversely, agricultural activity improved slightly in the third quarter, with growth picking up slightly to 0.9% in annual terms. Meanwhile, the industrial sector continued to contract, albeit at a slower pace. Industrial output fell 0.5% in Q3, after a sharper drop in Q2. The earthquakes are also likely to have temporarily weighed on the sector; however, robust manufacturing is providing some relief.
On a sequential basis, GDP adjusted for seasonal patterns fell 0.2%, the first contraction in over four years (Q2: +0.6% quarter-on-quarter).
Author: David Ampudia, Economist