MexECON Blog

First Quarter GDP Falls 0.3 Percent

The official statistics agency INEGI today confirmed that Mexico's first-quarter gross domestic product (GDP) fell 0.3% from the previous quarter, using constant prices and adjusting for seasonal variations.  That marked the first quarterly decline in a year, though it reversed only a small part of the 1.9% increase in the fourth quarter and the 2.4% increase in the third quarter.  According to the report, Mexican exports continued to surge in the first quarter, rising 7.0% from the previous three months.  Private-sector fixed investment jumped 5.9%, for its first increase since mid-2008.  Investment in inventories also rose.  However, these positives were offset by a jump in imports and modest pullbacks in public-sector investment and private consumption.  Despite the decline from the previous three months, Mexico's GDP in the first quarter was up a robust 4.3% from the same period one year earlier, for the first year-over-year increase since the third quarter of 2008. 

Comment:  Despite the small decline in Mexico's GDP during the first quarter, the recent economic rebound appears to remain in place.  The rebound has come mostly from increased exports to the recovering U.S. economy.  Renewed exports have prompted increased industrial activity and hiring.  Therefore, inventory rebuilding and personal consumption have also contributed to the rise in activity.  The rise in private fixed investment indicated in today's report is particularly important because it suggests that Mexico's economic rebound may be broadening.  If so, the rebound will become more robust, and Mexico will be in a better position to withstand any new shocks.  That is important because there are several significant risks facing the Mexican economy, such as the possibility of renewed strengthening in the peso, an ongoing credit crunch in Mexico's domestic financial markets, and the global financial markets' renewed risk aversion in the face of possible debt defaults in Europe.  On balance, Mexico's economic recovery appears more likely to continue than to end, but the risks cannot be totally discounted.

Patrick Fearon, CFA
Vice President, Fund Management

            Mexico's Gross Domestic Product (GDP)
             Million 2003 Pesos, Seasonally Adjusted
                                   Source:  INEGI
GDP 2010 Q1 Rev

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