In an initial estimate, Mexico's third-quarter gross domestic
product (GDP) rose 0.7% from the previous quarter, based on
constant prices and adjusting for seasonal variations.
Second-quarter GDP was revised downward to show a rise of 2.3%, and
first-quarter GDP was revised upward to show a gain of 0.6%.
According to the report, from the national statistics agency INEGI,
output increased in primary activities (farming, ranching,
forestry, and fishing), secondary activities (mining, utilities,
construction, and manufacturing), and in tertiary activities
(services and government).
Without seasonal adjustments, third-quarter GDP was up 5.3% from
the same period one year earlier. That marked a deceleration
from the 7.6% gain in the second quarter, but it was still stronger
than the year-over-year increase in the first quarter. The
report said third-quarter output in the primary sector was up a
robust 8.9% year-over-year, mostly because of strong increases in
the output of farm products, such as sugar cane, sorghum, corn,
wheat, bell peppers, and tomatoes. Output in the secondary
sector was up 6.2% year-over-year, in large part because of a 9.6%
rise in manufacturing output. Meanwhile, output in the
tertiary sector was up 4.2%, reflecting increased activity in
retail and wholesale trade, transport, information services, and
real estate services.
Comment: The deceleration in
Mexican growth during the third quarter should come as no
surprise. Growth during the second quarter was extremely
strong, even after the revisions in today's report, and such strong
growth was clearly unsustainable. In spite of the slowdown,
growth in the third quarter was encouraging. The significant
contribution from farming was especially gratifying to those of us
at Terra Nova Ventures, where we focus strongly on
agriculture. In addition, the increased activity in
manufacturing was more broad-based than expected. That could
suggest the country's current economic rebound is becoming somewhat
less dependent on exports of trucks, autos, and auto parts.
Nevertheless, the services sector continues to lag, which may in
part reflect the impact of rising violence by drug cartels.
In addition, most observers still expect Mexican growth to moderate
in the coming quarters. The big upcoming challenge is that
exports are expected to slow in response to weaker U.S. demand, as
the impact of fiscal stimulus begins to wane in the United States,
as U.S. inventory rebuilding peters out, and as U.S. consumers
continue to husband their resources and pay down debt.
Patrick Fearon, CFA
Vice President, Fund Management
Mexican Gross Domestic
Seasonally Adjusted, Millions of 2003