Mexico: Mexico's economy cools through year-end
January 30, 2019
A preliminary estimate for economic growth in the fourth quarter fell shy of analysts’ expectations and confirmed a year-end slowdown on the heels of two upbeat quarters. By most measures, the fourth-quarter reading was downbeat. In annual terms, unadjusted output grew at 1.8%—down from the third quarter’s 2.5% outturn and a couple of notches below analysts’ expectations. Meanwhile, seasonally-adjusted quarter-on-quarter figures cooled considerably (Q3: +0.3% quarter-on-quarter s.a.; Q2: +0.8% qoq s.a.) amid a slump in industrial-sector output.
Unadjusted annual figures revealed a disappointing outturn for the industrial sector, which contracted 0.7% year-on-year (Q2: +1.1% year-on-year) on slumping construction activity, as well as free-falling mining output. All-important manufacturing gains were tepid in the quarter, still underpinned by a strong stateside economy. Services-sector activity, meanwhile, decelerated but remained fairly robust (Q3: +2.9% yoy; Q2: +3.2% yoy). Low inflation and solid labor-market gains appeared to help, although it was likely negatively impacted by the late-year political turmoil that upended economic sentiment. On the other hand, agricultural-sector activity jumped in the quarter (Q3: +2.8% yoy; Q2: +2.2% yoy).
Overall, the estimate highlighted risks for the economy heading into the new year. On the upside, household spending is expected to remain upbeat thanks to the continued expansion of credit. Conversely, downside risks continue to mount for the industrial sector as a shakier global economy and the threat of continued policy uncertainty bruise fixed investment.
Author: Christopher Thomas, Economist