Mexico's Output Growth Slows In The Fourth Quarter

from the Dallas Fed

Mexico’s economy grew an annualized 1.2 percent in fourth quarter 2018 after expanding 3.4 percent in the third quarter. Gross domestic product (GDP) grew 2.1 percent in 2018 (fourth quarter/fourth quarter). The consensus growth forecast for 2019, compiled by Banco de México, was revised down from 1.9 percent in December to 1.8 percent in January.[ 1]

Other data are mixed. Exports, employment and retail sales grew, while industrial production fell. The peso strengthened against the dollar, but inflation increased slightly.

GDP Growth Falls Below 10-Year Average

Mexico’s fourth-quarter GDP growth of 1.2 percent was below its long-run average (Chart 1). Output from goods-producing industries (manufacturing, construction, utilities and mining) fell 4.3 percent, while service-related activities (wholesale and retail trade, transportation and business services) grew 3.2 percent. Agricultural output rose 7.8 percent.

Chart 1

Exports Tick Up in December

Total exports increased 1.7 percent in December after falling 1.5 percent in November. Manufactured-goods and oil exports grew 1.1 percent and 1.8 percent, respectively, in December. However, the three-month moving averages continue showing declines (Chart 2). In 2018, total exports were up 7.3 percent, with manufacturing exports growing 6.3 percent and oil exports surging 26 percent. It bears noting that the rise in oil exports in 2018 stems largely from higher oil prices earlier in the year, not an increase in the volume of exports.

Chart 2

Industrial Production Drops in November

Mexico’s industrial production (IP) index, which includes manufacturing, construction, oil and gas extraction, and utilities, decreased 0.6 percent in November after falling 1.7 percent in October. The manufacturing index grew 1.0 percent in November after falling 2.5 percent in October. As a result, the three-month moving averages ticked down for both total production and manufacturing (Chart 3). Meanwhile, north of the border, U.S. IP ticked up 0.3 percent in December following a 0.5 percent increase in November. The correlation between Mexico’s IP and U.S. IP increased considerably due to growth in intra-industry trade following the implementation of the 1994 North American Free Trade Agreement.

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