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Mexico GDP Q1 2019

Mexico: Mexico’s economy slows in Q1 on industrial- and services-sector woes

A comprehensive estimate for growth in the first quarter confirmed weaker-than-expected economic activity at the outset of the year. In annual terms, unadjusted output grew 1.2% year-on-year (previously reported: +1.3% year-on-year), down markedly from 1.7% in the fourth quarter of last year and a couple of notches below analysts’ expectations. Meanwhile, seasonally-adjusted quarter-on-quarter output contracted (Q1: -0.2% quarter-on-quarter s.a.; Q4 2018: +0.2% qoq s.a.) amid a slump in industrial-sector activity.

For the most part, supply-side dynamics went unaltered from the preliminary estimate. Industrial-sector output (Q1: -0.7% yoy; Q4 2018: -0.9% yoy) fell for the third time in five quarters on declining oil and gas production, as well as on weaker construction activity amid budget cuts. Services-sector output, on the other hand, decelerated considerably (Q1: +1.9% yoy; Q4 2018: +2.7% yoy) despite strong wage growth and resilient consumer confidence; analysts blamed so-called political business cycle. Agricultural-sector output, lastly, jumped in the quarter (Q1: +5.8% yoy; Q4 2018: +2.9% yoy).

Commenting on the first-quarter outturn, Gabriel Lozano, chief economist at JPMorgan, noted:

“Economic data released today did little to change our view on the recent performance of the economy. […] The main conclusion out of today’s reports is that momentum in services is not particularly strong, and [industrial production] remains trapped amidst contractions in oil-production and budget-related declines in government spending, the latter affecting construction significantly. […] Recent economic dynamics in the U.S. suggest the little hope we had for a healthy rebound given the strong links between Mexico and the U.S. is increasingly unlikely, and if domestic consumption remains lackluster as well […] we will be running out of options: We are maintaining our call for 1.4% growth this year but the downside risks are not negligible.”

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