Mexican growth: shifting gears?

If Mexico’s strong economic recovery since the 2009 recession has been about manufacturing and exports, the latest data suggest that from now on it is going to be about consumption.

That is the message from figures for the last three months of 2012, which show that growth between October and December was 0.8 per cent in seasonally adjusted terms compared with the previous three months (in the third quarter, the figure was just 0.4 per cent).

That brought growth in the last three months of 2012 to 3.2 per cent compared with the same quarter of 2011, and to 3.9 per cent growth for the whole of 2012. The result not only matches the growth rate for 2011 but is also practically twice the average annual growth rate seen in Mexico during the first decade of the 2000s.

Look a little closer, though, and you can start to see some important shifts. The main one is that there is a clear weakening of the industrial sector, until now the primary engine of Mexico’s recovery. According to Inegi, the government’s statistics agency, the industrial component of overall growth in the fourth quarter contracted 0.2 per cent in seasonally adjusted terms compared with the third quarter. That same figure for the third quarter was a positive growth of 0.4 per cent compared with the second quarter.

At the same time, however, the agricultural and service sectors showed an unmistakable improvement, a fact that underlines the recovery of Mexico’s domestic demand. Agriculture grew 2.1 per cent during the last three months of the year in seasonally adjusted terms compared with the third quarter. Meanwhile, services, which accounts for a huge 63 per cent of gross domestic product, grew 0.7 per cent.

Here is HSBC’s take on the figures, which it said reflected “a weakening in the industrial sector.”

It added:

This situation suggests that Mexico is not immune to a feeble global panorama, particularly in the US. Going forward, we expect growth to keep showing weak rates as we believe that the fiscal adjustments already in place, together with the uncertainties regarding further adjustments might have prompted a reduction in industrial orders.

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