MexECON Blog

First Quarter GDP Rises 4.3 Percent YOY

In an initial estimate, the official statistics agency INEGI said Mexico's first-quarter gross domestic product (GDP) was up 4.3% compared with the same period one year earlier.  It was the first year-over-year increase since the third quarter of 2008.  It followed a decline of 2.3% in the year ended in the fourth quarter of 2009.  On a year-over-year basis, Mexico's GDP had fallen 6.1% in the third quarter and 10.0% in the second quarter (see chart below).  Despite these positive trends, the report contained some surprising weak spots.  On a seasonally-adjusted, quarter-over-quarter basis, Mexico's GDP fell 0.4%, erasing part of its 1.9% gain in the fourth quarter.  The quarter-over-quarter decline reflected a sharp drop in the agricultural production and a modest pullback in industry (mining, utilities, construction and manufacturing).  The data pointed to a modest gain in service activity.

Comment:  The quarter-over-quarter decline seems at odds with the recent economic data coming out of Mexico.  Those reports suggest that inventory rebuilding and a pickup in corporate and consumer demand north of the border has led to a revival of Mexico's industrial sector and an increase in hiring.  In about a month, INEGI will release more detailed figures, which will allow a detailed analysis of what was driving the Mexican economy in early 2010.  Until then, it seems reasonable to take the reported quarter-over-quarter decline with a grain of salt.  The Mexican economy still seems to be on a much better footing than it was in early 2009, and though there are risks to the economic recovery, the overall momentum still seems positive.  With the financial markets spooked once again about sovereign debt defaults in Europe, Mexican asset prices and the peso have come under renewed pressure.  However, if the economy maintains its recent momentum, Mexican assets and the peso are in a good position to rebound when financial fears retreat.

Patrick Fearon, CFA
Vice President, Fund Management

                                                  Mexican GDP Growth
                                        Percent Change, Year-Over-Year
                                                      Source:  INEGI
GDP 2010 Q1 A

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