The Mexican economy grew 2.2 percent year-over year in Q3, improving upon the second quarter’s 1.6 percent pace. Compared to Q2 the economy grew 0.5 percent, which was a bit weaker than expected.
Still No Signs of the Strong Recovery Markets Were Expecting
The Mexican economy has continued to disappoint after the historic structural reforms passed by the Peña Nieto administration during the past two years. The results for the third quarter were better than in previous quarters, but still below expectations. Still, the 2.2 percent in Q3 was the strongest year-over-year performance since the Q4-2012. Demand GDP components will not be ready for another month or so but we can gauge some of these sectors by looking at the supply side of the economy.
One of the most important developments during the third quarter is the recovery in the construction sector, a sector crushed during the last two years. That sector posted a strong 4.0 percent year-over-year growth rate in the third quarter. This was the first positive reading for this sector since the Q4-2012. Manufacturing was relatively strong, posting a year-over-year growth rate of 3.2 percent, while consumer demand was also stronger given the strengthening of the commerce sector. Commerce was up 3.9 percent after being up only 1.8 percent in the second quarter. This was the highest year-over-year growth rate since the third quarter of 2013. One of the weakest components of the industrial sector was mining activity, whose production declined once again, this time by 2.1 percent compared to the same quarter a year earlier. This was the fifth year-over-year decline in mining in the last six quarters as well as the largest year-over-year decline since a 4.6 percent drop during in Q4-2009. Another negative for growth was the performance of the Mexican transportation sector, whose growth slowed down considerably, to 1.1 percent in Q3 compared to a 1.7 percent rate in Q2. Although the growth of this sector was positive, the performance was the weakest performance of this sector since the third quarter of 2009.
Still No Clear Perspective for Next Year
Almost every analyst last year argued that this year’s growth was going to be better because the Peña Nieto administration, busy with the reform process in 2013, had forgotten to spend money. Real government consumption in 2013 inched up only 1.2 percent versus 2.8 percent in 2012. The argument was that this year’s GDP boost was going to come from higher government expenditures. However, if that was the case for 2014, what would happen in 2015 if petroleum prices remain at current levels? If petroleum prices remain at current levels government consumption growth next year will probably be constrained, exerting downward pressure on GDP growth for 2015. Still, the private sector will continue to improve and we will see growth next year. However, our guess is that analysts will probably start to dial down GDP growth estimates for Mexico next year.
General Risk Warning for stocks, cryptocurrencies, ETP, FX & CFD Trading. Investment assets are leveraged products. Trading related to foreign exchange, commodities, financial indices, stocks, ETP, cryptocurrencies, and other underlying variables carry a high level of risk and can result in the loss of all of your investment. As such, variable investments may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall Witbrew LLC and associates have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to investment trading or (b) any direct, indirect, special, consequential or incidental damages whatsoever.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.