FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 27 September 2015

Mexico Outlook Revised Down Despite Faster Growth In Second Quarter

from the Dallas Fed

Mexico's economy grew at an annualized rate of 2 percent in the second quarter, up from 1.7 percent in the first quarter. More recent data suggest that growth continued into the third quarter. Exports, employment, retail sales and industrial production are all up. Inflation is under control even as the peso has depreciated further against the dollar to levels not seen in recent history.

Despite higher growth in the second quarter, the consensus 2015 gross domestic product growth forecast was revised down to 2.3 percent in August from 2.7 percent in July. The downward revision was based largely on falling government revenue - a result of lower oil prices and the potential negative effect of higher import prices on economic activity.

Second Quarter Output Picks Up

Mexico's economy grew 2 percent in the second quarter mostly due to strength in the service sector as both manufacturing and agricultural output contracted (Chart 1). Service-related activities (including trade, transportation and business services) advanced 3.5 percent, while goods-producing industry output (including manufacturing, construction, utilities and mining) ticked down 0.1 percent. Agricultural output fell 6.1 percent in the second quarter.

Exports Expand Again

Exports grew 4.2 percent in July after rising 3.6 percent in June. The three-month moving average has stabilized after declining for about five months (Chart 2). Oil exports rose in the most recent months likely due to the temporary improvement in oil prices seen in late spring; however, there may be a reversal in trend when August and September data become available. Overall, oil exports are down 43 percent in the first seven months of 2015 compared with the same period a year ago. Manufacturing exports grew 3.6 percent year to date through July relative to the same period last year.

Industrial Production Grows in June

Mexico's industrial production (IP) grew 0.2 percent in June after falling 0.4 percent in May. Three-month moving averages show a slowing in total IP, which includes manufacturing, construction, oil and gas extraction and utilities (Chart 3). In contrast, manufacturing IP continues on an upward trend. Meanwhile, U.S. IP grew 0.6 percent in July - the second consecutive month of increases - after declining for five months in a row.

Retail Sales Increase in June

Retail sales rose 1.1 percent in June after growing 0.2 percent in May. The three-month moving average shows strong growth over the first six months of the year (Chart 4). Year over year, retail sales are up 5 percent. However, consumer confidence worsened in July.

Job Growth Continues Strong in 2015

Formal-sector employment - jobs with government benefits and pensions - rose at an annualized rate of 4.7 percent in July (Chart 5). Year to date, employment is up an annualized 4.3 percent from December, which is the same as the 2014 annual job growth rate.

Peso Depreciates in August

The peso fell against the dollar in August, when the exchange rate averaged 16.5 pesos per dollar, up from 15.9 pesos in July (Chart 6). The peso has lost 20 percent of its value against the dollar year over year. The Mexican currency has been unstable, partly as a result of the expectation of an increase in U.S. interest rates and the impact of falling oil prices on Mexico's government finances. Oil revenues account for about a third of the federal government budget.

Inflation Hits Another Historical Low

Inflation fell to 2.6 percent in August, below the central bank's long-term inflation target of 3 percent (Chart 7). Prices, excluding food and energy, rose 2.3 percent. Banco de México has kept policy rates on hold since June 2014 as central bank policymakers believe that inflation expectations are well-anchored. However, they have noted their intent to raise interest rates as soon as the Federal Reserve tightens to prevent any further deterioration of the peso, which could push up inflation.

About the Author

Cañas is a business economist in the Research Department at the Federal Reserve Bank of Dallas.


>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
From Money Controlling People to People Controlling Money
Rising Tide Does Not Lift All Ships
News Blog
Infographic Of The Day: The Most Popular Jobs In A Decade
Early And Late Cycle Verdicts Are Baseless
The Surprising Divergence Of Employment And Capacity Utilization
The Slump In Undocumented Immigration To The United States
U.S. Productivity Growth Flowing Downstream
Your Light Bulbs Could Be Playing Havoc With Your Health - Here's Why
Mentions Of Trump And Clinton In Hip Hop Lyrics
Salary Is The Most Important Job Criterion
Can Switch Replicate Nintendos Past Success
The Numbers Behind The Zumwalt
Docking A Huge Cruise Ship Is More Complicated Than You Think
New Seasonal Outlook Updates from NOAA and JAMSTEC - Let's Compare Them.
Infographic Of The Day: Driving Into A Battery Powered Future
Investing Blog
FinTech Is Taking A Bite Out Of Banks
Options Early Assignment - Should You Worry?
Opinion Blog
The Beer Goggles Stock Market
US 2016 Election: Will US-China Relations Change
Precious Metals Blog
Preparing For Post-Election Social Unrest
Live Markets
21Oct2016 Market Close: Major US Indexes Close Flat On Low Volume, Crude Prices Resume Climb, US Dollar Stabilizes In Mid 98 Handle, Yes, Most Investors Are Worried Which Way This Market Will Go
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved