MexECON Blog

Third Quarter GDP Rises 1.3 Percent

In an initial estimate, Mexico's third-quarter gross domestic product (GDP) rose 1.3% from the previous quarter, based on constant prices and adjusting for seasonal variations.  Growth in the second quarter was revised upward to show a similar 1.3% gain.  Mexican GDP has now risen for nine straight quarters.

According to today's report, from the official statistics agency INEGI, output in the primary sector (farming, ranching, forestry, and fishing) jumped 11.8% in the third quarter, after a rise of 0.5% in the second quarter and a decline of 4.8% in the first quarter.  However, output in the secondary sector (mining, utilities, construction, and manufacturing) was up just 0.5%, marking its slowest expansion since the current economic recovery began.  Output in the tertiary sector (services and government) was up 1.6% in the third quarter, accelerating further from the increases of 1.1% in the second quarter and 0.8% in the first quarter.

Without seasonal adjustments, Mexican GDP in the third quarter was up 4.5% from the same period one year earlier, after a rise of 3.2% in the second quarter.  In the primary sector, output was up 8.3%, after two straight quarters of year-over-year declines.  According to the report, the rise came mostly from increased production of agricultural products such as corn, sorghum, oranges, avocados, grapes, potatoes, onions, and apples.  In the secondary sector, output was up 3.4% year-over-year, after increases of 3.5% in the second quarter and 5.3% in the first quarter.  Weaker production of petroleum and other mineral products continues to offset some of the strong gains in utility output, construction, and manufacturing.  Finally, third-quarter output in the tertiary sector was up a robust 4.8% year-over-year, after an increase of 3.5% in the second quarter.  Government activity posted a second straight year-over-year decline in the third quarter, but that was offset by generally good increases in the other service industries, including 8.0% gains in commercial trade and mass media.

Comment:  Not only is the Mexican economy continuing to grow well, but its year-over-year growth rate accelerated during the summer in spite of slowing demand and financial turbulence abroad.  Much of this surprisingly good performance appears to stem from the fact that the Mexican economic recovery has broadened beyond export manufacturing to include domestic sectors such as investment and consumption.  The momentum in domestic demand is evident in today's report of robust year-over-year increases in service activities.  Indeed, the service sector has been the predominant source of Mexican growth for the last several quarters.  Nevertheless, slowing demand abroad and turbulence in the world's financial markets pose a risk, and Mexican growth is still likely to moderate in the coming quarters to something closer to its long-term average rate of 2.8%.

Patrick Fearon, CFA
Vice President, Fund Management

                                  Mexican Gross Domestic Product (GDP)
                               Seasonally Adjusted, Millions of 2003 Pesos
                                                       Source:  INEGI
GDP 2011 Q3

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