MexECON Blog

Fourth Quarter GDP Rises 0.8 Percent

In a preliminary estimate, Mexico's fourth-quarter gross domestic product (GDP) rose 0.8% from the previous quarter, based on constant prices and adjusting for seasonal variations.  The rise in the fourth quarter was double the revised increase of 0.4% in the third quarter, but it was still weaker than the 1.3% gain in the second quarter.  According to the report, from the official statistics agency INEGI, output in the primary sector (farming, ranching, forestry, and fishing) was up 2.1% in the fourth quarter, after a rise of 0.3% in the third period and a flat performance in the period before that.  Output in the secondary sector (mining, utilities, construction, and manufacturing) declined 0.2%, for its first decrease since the 2008-2009 recession.  Output in the tertiary sector (services and government) rose 0.7%, accelerating from a rise of 0.6% in the third quarter.  However, that gain was still weaker than the sector's 1.0% increase in the second period.

Without seasonal adjustments, Mexican GDP in the fourth quarter was up 3.2% from the same period one year earlier.  That matched the year-over-year increase in the third quarter, but it was weaker than the increases of 4.5% in the second quarter and 4.9% in the first quarter.  In the primary sector, fourth-quarter output was up a robust 7.2% year-over-year, mostly reflecting increases in farm products such as corn, wheat, beans, and coffee.  In the secondary sector, fourth-quarter output was up just 1.8% year-over-year, as good increases in manufacturing, utilities, and mining were partially offset by a decrease in construction.  Finally, tertiary-sector output in the fourth quarter was up 3.4% year-over-year, after rising 3.3% in the third period.  Wholesale and retail trade, transportation, and mass media accounted for the lion's share of the sector's growth, while the weakest industries were professional and technical services and government.

For 2012 as a whole, Mexican GDP was up 3.9%, matching its increase in 2011.  Output in the primary sector was up 6.7% in 2012, while output in the secondary sector was up 3.6%.  Output in the tertiary sector was up 4.1%.

Comment:  The Mexican economy is still growing faster than its average annual rate of 2.6% from 1991 to 2011, but the growth rate has clearly moderated.  Much of this moderation is normal as the economic cycle matures.  In addition, slow growth abroad and big economic risks emanating from key developed countries weighed on Mexico during the second half of 2012.  Domestic challenges, such as weakness in construction, have now started to become more noticeable.  A rebound in foreign demand and better consumer confidence in late 2012 and early 2013 should keep the Mexican economy growing at a good pace in the near term, but the extraordinary growth rates of 2010 and 2011 are unlikely to be repeated in this cycle.

Patrick Fearon, CFA
Vice President, Fund Management

                                           Mexican Gross Domestic Product
                                    Seasonally Adjusted, Millions of 2003 Pesos
                                                       Source:  INEGI
GDP 2012 Q4 Initial

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