MexECON Blog

Second Quarter GDP Rises 0.9 Percent

In an initial estimate, Mexico's second-quarter gross domestic product (GDP) was up 0.9% from the previous quarter, based on constant prices and adjusting for seasonal variations.  That followed a revised 1.2% increase in the first quarter and a 0.7% rise in the final quarter of 2011.  According to the report, from the official statistics agency INEGI, output in the primary sector (farming, ranching, forestry, and fishing) edged down 0.2% in the second quarter, erasing a small part of its 2.3% increase in the first quarter.  Output in the secondary sector (mining, utilities, construction, and manufacturing) rose 0.6%, slowing from a 1.3% expansion in the previous period, and output in the tertiary sector (services and government) was up 1.1%, accelerating from its 0.7% rise in January through March.

Without seasonal adjustments, Mexican GDP in the second quarter was up 4.1% from the same period one year earlier.  The increase was a bit softer than the revised 4.5% increase in the first quarter, but it was still well above Mexico's average annual growth rate of just 2.6% from 1991 through 2011.  In the primary sector, second-quarter output surged 9.5% from one year earlier, largely reflecting a return to good weather after unusual freezes devastated agricultural production in early 2011.  A wide range of agricultural products posted strong gains, including corn, oats, sorghum, tomatoes, bell peppers, grapes, avocados, and sugarcane.  In the secondary sector, output in the second quarter was up 3.6% year-over-year, after a rise of 4.6% in the first quarter.  The rise came mostly from a 4.5% gain in manufacturing and a 4.9% jump in construction activity.  Finally, second-quarter output in the tertiary sector was up 4.4% year-over-year, almost matching the 4.7% increase in the first quarter.  The rise came primarily from good increases in wholesale and retail trade, financial services, transportation, and media.

Comment:  Mexico's economic growth has reaccelerated in 2012, mostly because exports have strengthened again after hitting a soft patch late last year.  The good rise in manufacturing in today's report is consistent with the improvement in exports.  However, the robust increases in construction, finance, and wholesale and retail trade during the second quarter suggest domestic demand also continues to grow well.  Going forward, the momentum in domestic demand is likely to keep Mexico growing at a good pace through the rest of the year, even if the European debt crisis does not improve much and U.S. economic growth continues to be weak.  The main risk is if either of those problems worsens dramatically, in which case Mexican activity would probably slow precipitously or even decline.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Mexican Gross Domestic Product
                                   Seasonally Adjusted, Millions of 2003 Pesos
                                                     Source:  INEGI
GDP 2012 Q2 Initial

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