Mexico GDP

Mexico

Mexico: Less dynamism in the external sector and weak government spending drag on growth

September 18, 2015

Mexico’s GDP lost momentum in the second quarter due to slower government spending and lower exports. GDP increased 2.2% annually in Q2, which was down from the 2.6% expansion registered in Q1.

Looking at the components of domestic demand, total consumption slowed in the second quarter as a result of weaker government consumption. Government spending began to feel impact of the austerity measures that the administration of President Peña Nieto had implemented and grew 2.7% year-on-year in Q2, which marked a slowdown from the 3.2% rise in Q1. Although the pace of private consumption did moderate, it was still solid in Q2 at a 3.0% increase; this was slightly below the 3.2% expansion seen in Q1. Meanwhile, gross fixed investment accelerated from a 5.3% increase in Q1 to a 5.5% expansion in Q2.

The contribution from the external sector to overall economic growth fell slightly in Q2 compared to the previous period. Exports of goods and services increased 8.9% in the second quarter, which marked a deceleration compared to the notable 12.0% expansion tallied in Q1. On the other side of the balance, imports grew 5.5% in Q2, which was slightly below the 6.0% rise tallied in Q1. As a result, the contribution from net exports to overall growth fell from 1.7 percentage points in Q1 to 1.2 percentage points in Q2.

Sequential data continued to suggest that economic growth in Mexico is still healthy. GDP increased a seasonally-adjusted 0.5% in Q2 over the previous quarter, which was slightly above the 0.4% registered in Q1.

The government expects the economy to grow between 2.0% and 2.8% in 2015. For 2016, the government predicts economic growth of between 2.6% and 3.6%. Mexico’s Central Bank expects the economy to expand between 1.7% and 2.5% this year. For 2016, the Bank sees the economy growing between 2.5% and 3.5%. LatinFocus Consensus Forecast panelists see the economy increasing 2.4% in 2015, which is down 0.1 percentage points from last month’s forecast. For 2016, the panel expects growth to pick up to 3.0%.


Author:, Senior Economist

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Mexico GDP Q2 2015 0

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


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