MexECON Blog

First Quarter GDP Rises 0.3 Percent

In an initial estimate, Mexico's first-quarter gross domestic product (GDP) was up 0.3% from the previous quarter, at constant prices and adjusting for seasonal variations.  That followed revised increases of 0.1% in the fourth quarter and 1.0% in the third quarter.  According to the report, the rise at the beginning of 2014 came mostly from increased activity in the tertiary sector (services and government).  The secondary sector (mining, utilities, construction, and manufacturing) also posted a small increase, but the primary sector (farming, ranching, forestry, and fishing) was essentially flat.

Without seasonal adjustments, GDP in the first quarter was up 1.8% from the same period one year earlier.  That marked a significant acceleration from the year-over-year increase of 0.7% in the fourth quarter, and it was the strongest annual rise since the last quarter of 2012.  However, it was still weaker than Mexico's average annual increase of 2.6% over the last two decades.  The rise in the first quarter came mostly from a 1.8% expansion in the tertiary sector and a 1.6% increase in the secondary sector.  Output in the primary sector was up a robust 4.9% from one year earlier, but because that sector is a relatively small part of the country's economy, it contributed little.

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

Comment:  Mexican economic growth may have accelerated a bit in the first quarter, but it remains relatively lackluster.  In fact, the recent data have been so cold that Banco de México this week cut its growth forecast for full-year 2014 to 2.3% to 3.3%, and the government cut its forecast to 2.7%.  In my opinion, even those forecasts look optimistic.  One problem is that Mexican exports are not growing robustly.  In addition, even if exports accelerate in response to the apparent rebound in U.S. economic growth, domestic demand in Mexico remains weak.  The construction sector still shows no sign of a sustained rebound, and consumer spending continues to be held back by a tepid labor market and recent sales tax hikes.  The government's economic reform program holds out some promise that Mexico's growth rate could accelerate in a meaningful way in the coming years.  In the near term, however, growth is likely to remain uninspiring.

Patrick Fearon, CFA
Vice President, Fund Management

GDP 2014 Q1 Initial

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