Mexico: Slower growth confirmed amid fading base effect
December 21, 2010
A more complete set of data for GDP confirmed the third quarter 5.3% year-on-year expansion reported earlier. The deceleration over the second quarter's extraordinary 7.6% expansion mostly reflected the waning of the favourable base effect that boosted the figure. The second quarter 2009 had marked the trough of the recession with a 9.6% annual contraction. While the slowdown was broad-based, a weak external sector was the key drag on overall growth. Exports decelerated markedly from a 33.5% expansion in the second quarter, which represented the strongest expansion in over a decade, to an 18.8% increase. Meanwhile, imports decelerated less markedly, expanding 22.5% in the third quarter (Q2: +31.8% yoy). As a result, the net contribution from the external sector to overall growth swung from plus 0.2 percentage points in the second quarter to minus 1.7 percentage points in the third quarter. In the domestic sector, total consumption slowed significantly, falling from a 7.4% increase in the second quarter to a 4.6% expansion. The deceleration was the result of weaker growth in both private consumption (Q2: +7.8% yoy; Q3: +5.0% yoy) and government spending. In contrast, gross fixed investment accelerated from a 1.9% increase to a 3.8% expansion which, along with a build-up in inventories, partially offset the lower consumption growth. Both the government and the Central Bank expect the economy to have grown 5.0% in 2010. For this year, the government announced it will raise its current 3.9% growth forecast in the coming weeks.