Mexico: Economy gains some momentum in Q2, but sequential data suggest deterioration
September 19, 2013
In Q2, GDP increased 1.5% over the same quarter last year, which represents a slight improvement compared to the revised 0.6% expansion observed in Q1 (previously reported: +0.8% year-on-year). Owing to a revision of Mexico's national accounts historical data, the economy has grown 3.8% in 2012 (previously reported: +3.9%). Due to the revision, it is now reported that the Mexican economy contracted 4.7% in 2009, which was less than the 6.0% plunge that had been reported initially.
The improvement in Q2 was seen across the board. Total consumption increased 3.0% annually in Q2 (Q1: +2.2% yoy), buttressed by faster growth in private consumption (Q2: +3.5% yoy; Q1: +2.5% yoy) and in government consumption (Q2:+0.4% yoy; Q1: +0.1% yoy). In addition, gross fixed investment swung from a 0.8% contraction in Q1 to a 0.4% expansion in Q2.
On the external front, exports of goods and services rebounded and expanded 2.7% in Q2, contrasting the 1.0% decrease observed in Q1. Similarly, imports swung from a 0.9% contraction in Q1 to a 2.8% expansion in Q2. Despite the improvement in exports, the external sector's net contribution to overall economic growth remained unchanged at Q1's zero percentage points.
A quarter-on-quarter comparison, however, does not confirm the slight improvement suggested by the annual data. GDP contracted 0.7% in Q2 in seasonally-adjusted terms, which was below the revised 0.0% recorded in Q1 (previously reported: +0.5% quarter-on-quarter). The Q2 contraction suggests that, considering the seasonal effects, the economy would have grown only 0.3% annually in Q2 (rather than 1.5%), and would have come in below the 2.6% expansion in Q1 (rather than +0.6%).
Due to the fact that the second quarter expansion was weaker than expected, the Finance Ministry lowered its growth projections for this year and now expects the economy to expand 1.8%, which is well below its previous estimate of 3.1%. The Central Bank (Banxico) expects the economy to grow between 2.0% and 3.0% this year. For 2014, the Bank sees economic growth between 3.2% and 4.2%.
LatinFocus Consensus Forecast panelists see the economy increasing 2.1% this year, which is down 0.7 percentage points from last month's forecast. For next year, the panel expects growth to pick up to 3.7%.
Author: Ricardo Aceves, Senior Economist