MexECON Blog

Fourth Quarter GDP Rises 0.2 Percent

In an initial estimate, Mexico's fourth-quarter gross domestic product (GDP) was up just 0.2% from the previous quarter, at constant prices and adjusting for seasonal variations.  That followed a revised 0.9% jump in the third quarter and a 0.7% slump in the second quarter.  According to the report, the marginal rise during the fourth quarter came mostly from a 0.2% uptick in the tertiary sector (services and government).  Output in the primary sector (farming, ranching, forestry, and fishing) also rose 0.2%, but that was largely offset by a slight contraction in the secondary sector (mining, utilities, construction, and manufacturing).  Within the secondary sector, construction decreased for the sixth straight quarter at the end of 2013, but only by 0.1%.  The main problem in the secondary sector was that manufacturing production dropped 0.5%, posting its first decline in more than a year.

Without seasonal adjustments, GDP in the fourth quarter was up just 0.7% from the same period one year earlier.  That was a big slowdown from the year-over-year increases of 1.4% in the third quarter and 1.6% in the second quarter, and it marked the second weakest increase since Mexico's current expansion phase began in 2009.  The rise in the fourth quarter came entirely from a 1.3% advance in the tertiary sector, which was helped by modest increases in wholesale trade, retail trade, and real estate services.  In contrast, fourth-quarter output in the primary sector was down 0.3% year-over-year, while output in the secondary sector was down 0.4%.

In all of 2013, Mexican GDP was up just 1.1% from the previous year, after a 3.9% increase in 2012.

The report was released today by INEGI, the official statistics agency.

Comment:  I have been warning that Mexico's economy is currently much less dynamic than suggested by the strong GDP increase in the third quarter.  That increase came in large part from a drop in imports, as domestic consumption demand remained weak and public and private investment continued to fall.  The weak GDP growth in the fourth quarter is consistent with my view that Mexican manufacturing is more mixed than suggested by the latest purchasing managers' reports, while the Mexican consumer is still reluctant to spend.  Even though today's report showed slowing declines in construction and a rise in real estate services during the fourth quarter, it is still clear to me that public works and residential housing are at best only starting to recover, and that a more substantial improvement in those sectors could take time.  The most likely scenario going forward is that the Mexican economy will continue to grow, but it may not accelerate as fast as some observers expect.  Indeed, Mexico's growth rate could remain below its long-term average of approximately 2.6% for a while yet. 

Patrick Fearon, CFA
Vice President, Fund Management

GDP 2013 Q4 Initial

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