MexECON Blog

Consumption Drives Second Quarter Growth

In an updated estimate, Mexico's second-quarter gross domestic product (GDP) rose 1.1% from the previous quarter, after adjusting for seasonal variations and stripping out price changes.  That marked the eighth straight quarter of economic growth in Mexico, and it was a significant acceleration from the first quarter's increase of 0.6%.  According to the report, from the official statistics agency INEGI, the main source of Mexico's growth in the second quarter was private consumption spending, which increased 0.7% and accounted for 0.5 percentage points of the overall growth in the quarter.  The second-most important source of growth was private investment, which rose 2.7% and also provided 0.5 percentage points of growth.  The third-most important source of growth was public investment, which surged 8.7% and contributed 0.4 percentage points of growth.  The main drag on growth in the second quarter was international trade.  While Mexican exports rose 0.8% in real terms during the quarter, imports rose 1.3%.  Net trade therefore detracted 0.2 percentage points from the country's growth rate.

Without seasonal adjustments, Mexico's second-quarter GDP was up 3.3% from the same period one year earlier.  That marked a continuing slowdown after the year-over-year increases of 4.6% in the first quarter, 4.4% in the fourth quarter of 2010, and increases of more than 5.0% in each of the two quarters before that.

Comment:  Net international trade was the main source of growth in the early part of Mexico's current economic recovery, but exports have been slowing, and imports have been accelerating.  At the same, investment and consumption spending have strengthened, and domestic demand has been the biggest source of growth for Mexico for the last several quarters.  Even though the sources of growth have broadened, however, there is a strong chance that economic sluggishness or renewed recession in the major developed countries will retard Mexican exports enough to put a damper on all of the county's main economic sectors.  Mexico's year-over-year growth is likely to slip below its long-term average rate of 2.9% in the coming quarters, and risks are to the downside.

Patrick Fearon, CFA
Vice President, Fund Management

GDP 2011 Q2 Contributions

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