Mexico: Q3 GDP growth confirmed, year-on-year data shows deceleration

A more comprehensive set of data showed that Mexico’s GDP growth lost momentum in the third quarter. According to a second release from the National Statistics Institute (INEGI), GDP increased 2.0% year-on-year in Q3 and matched INEGI’s preliminary estimate released on 31 October. Q3’s result came in below the upwardly-revised 2.6% expansion in Q2 (previously reported: +2.5% year-on-year). That said, sequential data adjusted for seasonal factors showed a substantial improvement in Q3. GDP expanded a robust 1.0% over the previous quarter in Q3, which accelerated from a 0.1% rise in Q2.

According to INEGI, Q3’s economic slowdown was mainly the result of a deterioration in industry. Growth in the secondary sector swung from a 0.9% increase in Q2 to a revised 0.8% contraction in Q3 (previously reported: -1.0% yoy), which was dragged down by a plunge in mining and quarrying and tepid construction growth. Conversely, both the agricultural and services sectors gained momentum in the third quarter, expanding 5.3% (Q2: +2.9% yoy) and 3.4% (Q2: +3.3% yoy), respectively.

While the acceleration in agriculture was good news, economic activity continues to be driven by growth in services on the back of still healthy private consumption. However, consumer fundamentals are expected to become less supportive in the coming quarters.

In its most recent Inflation Report, the Central Bank (Banxico) trimmed its growth forecasts and now expects the economy to grow between 1.8% and 2.3% (previous estimate: 1.7% and 2.5%). For 2017, the Bank expects GDP to grow between 1.7% and 2.5% (previous estimate: 2.0% and 3.0%). According to the latest survey of analysts for the LatinFocus Consensus Forecast, panelists see the economy increasing 2.1% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects growth to pick up to 2.3%, which is down 0.1 percentage points from last month’s estimate.