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Mexico GDP Q3 2018

Mexico: Mexican economy bounces back in Q3

A preliminary estimate for growth in the third quarter surprised to the upside, confirming the anticipated across-the-board improvement analysts had penciled-in on the heels of this year’s shaky first half. By all measures, the third-quarter reading was upbeat. In annual terms, unadjusted output grew at 2.6%—steady from the second quarter and a notch above analysts’ expectations. Meanwhile, seasonally-adjusted quarter-on-quarter numbers rebounded strongly (Q3: 0.9% quarter-on-quarter s.a.; Q2: -0.2% qoq s.a.) on solid agricultural- and services-sector outturns.

Unadjusted annual figures showed the services sector firmly in the driver’s seat again (Q3: +3.4% year-on-year; Q2: +3.3% yoy) despite higher inflation, likely buoyed—at least in part— by the post-election bump in consumer sentiment. Meanwhile, industrial-sector output grew roughly in-line with the second quarter (Q3: +1.1% yoy; Q2: +1.3% yoy) amid improving manufacturing and construction metrics. Mining activity, however, was again subdued on weak oil and gas output. Agricultural-sector output, for its part, posted stronger gains than a quarter earlier (Q3: +2.2% yoy; Q2: +1.8 % yoy).

Overall, the flash estimate was positive news for the economy as it looks to move beyond the economic volatility and political uncertainty that pervaded the run-up to this year’s bruising general election. That said, although the new United States-Mexico-Canada Agreement (USMCA) has gone a long way to suppress both, Andrés Manuel López Obrador’s (AMLO) 28 October call to cancel the USD 13 billion New Mexico City International Airport (NAIM) triggered significant uncertainty as analysts were forced to rethink the president-elect’s political tendencies. The peso fell sharply on the news; on 31 October, losses peaked at MXN 20.34 per USD before recovering somewhat in days following.

Commenting on the upbeat third-quarter report, Alexis Milo, chief economist at HSBC, stated:

“We expect economic activity to continue accelerating in the coming quarters, but the transition between two administrations tends to represent obstacles, due to a lack of continuity in some projects and administrative inefficiencies, which could prove challenging for the start of 2019. […] Overall, we expect the economy to keep growing at a healthy pace in the coming quarters, but increased uncertainty on domestic factors may prove challenging.”

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