MexECON Blog

Consumption Continues to Drive Growth

In an updated estimate, Mexico's third-quarter gross domestic product (GDP) rose 1.3% from the previous quarter, after adjusting for seasonal variations and stripping out price changes.  The increase was in line with the original estimate.  It also marked the second straight quarter in which Mexico's economy grew by a strong 1.3%, and it was the ninth straight quarter of expansion.  According to the report, from the official statistics agency INEGI, the main source of growth in the third quarter was private consumption spending, which increased 2.0%.  That was a significant acceleration from the revised increase of 0.8% in the second quarter, and it was the strongest increase in consumption since the current economic recovery began in mid-2009.  The second-most important source of growth was public investment, which rose 7.8%, after a jump of 12.7% in the previous quarter.  The third-most important source of growth was public consumption, which rose 2.1%, erasing its 2.0% decline in the previous quarter.  The main drag on growth in the third quarter was international trade.  On a seasonally-adjusted, constant-price basis, Mexican exports were essentially flat in the third quarter, but imports rose 2.2%.

Without seasonal adjustments, Mexico's third-quarter GDP was up 4.5% from the same period one year earlier.  That compared with year-over-year increases of 3.2% in the second quarter and 4.5% in the first quarter.

Comment:  At the beginning of Mexico's current expansion phase, net international trade was the primary source of growth.  Exports surged, in large part because of inventory rebuilding in the United States, while imports were subdued.  Growing industrial production, falling unemployment, and a stabilizing external environment eventually sparked a recovery in consumption and investment, and now domestic demand is growing fast enough to offset the impact of a recent slowdown in exports and a rise in imports.   In a word, the report today confirms that Mexico's economic expansion continues to broaden.  Mexico still faces important economic risks if Europe's debt crisis worsens again or Asian growth slows precipitously.  Even if those risks materialize, however, the momentum in Mexico's domestic demand would likely help limit the damage.

Patrick Fearon, CFA
Vice President, Fund Management

GDP 2011 Q3 Contributions

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