Mexico's Growth Slows Sharply


Recent data updates for Mexico have shown the economy continues to slowdown. In the first three months of 2013, the GDP grew only 0.8 percent yoy, the smallest expansion since the fourth quarter of 2009. Consumption which had been supporting the growth in previous quarters continues to decline and exports remain weak.

In April, consumer confidence stood below the optimism level of 100 points for third consecutive month. In March, retail sales declined for the second month in a row. In addition, industrial output contracted in two of the first three months of 2013. In fact, in March, industrial production recorded the biggest drop in more than 2 years. Moreover, after declining in the previous two months, in April, the jobless rate rose again. One the positive side, in April, exports increased 6.4 percent yoy, driven by a rise in the shipments of mining and agricultural products, 51.6 percent and 16.5 percent respectively. In addition,during its last monthly meeting, the Central Bank kept its monetary policy rate unchanged at 4 percent signaling the possibility of future interest rate cuts, even though inflation has been above its upper limit of 4 percent for the last two months. Furthermore, on May 8th, the rating agency Fitch raised Mexico´s foreign currency debt rating to BBB+ as it expects that the new government and Congress will reach an agreement on implementation of structural reforms aimed at increasing the tax base and opening the state-controlled energy sector. This decision came only two months after another rating agency, Standard & Poor´s, lifted Mexico´s outlook to positive.


In the first quarter of 2013, the GDP expanded 0.8 percent yoy. On a quarter over quarter basis, the economy grew 0.45 percent, down from the 0.77 percent registered in the previous quarter.

In April, the Consumer Confidence Index rose slightly to 95.73 points, from 95.38 in the previous month. In March, retail sales decreased 2.4 percent yoy, following a 2.6 percent contraction in the previous month.

In April, exports rose 6.4 percent yoy to $32863 million. Nevertheless, in the same period, Mexico posted a trade deficit of $1225 million, due to a 11.8 percent surge in imports.

In the 12 months through April, the inflation rate rose to 4.65 percent, the biggest increase since last October. On April 26th, the Bank of Mexico kept the key policy interest rate at 4 percent.


Duarte Ricardo | duarte.ricardo@tradingeconomics.com
5/27/2013 3:07:28 PM