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Economic activity weaker than
expected in final month last year
In December, the Mexican economy contracted 2.4%
compared to the same month the year before. The decline represented the
eighth consecutive monthly contraction in economic activity. Moreover,
the magnitude of the decline exceeded market expectations, which had hoped
for a better performance but still estimated an annual decline of 1.8% in
the final month last year. According to seasonal adjusted data, the
economy fell 1.0% over November, which represents the highest monthly
contraction in this ongoing recession. As a result of the weak December
reading, quarterly GDP figures came in a notch below the contraction
expected last month at minus 1.5%.
Industrial sector leads decline but
shows some improvement over third quarter
The fourth quarter contraction was led by the
industrial sector, which declined 4.1% over the same period the year
before, following on the even steeper 4.8% contraction registered in the
third quarter. The change for the better in the sector was prompted by
improvement in all subsectors when compared to the third quarter. Within
the industrial sector, the manufacturing industry constituted the weakest
category, dropping at an annual rate of 5.0%, which represented an
improvement over the 5.7% decline in the Q3 2001. Construction also
improved over the third quarter with a drop of 3.5% (Q3: -4.1% year-on-year).
Electricity, gas and water output added 2.4% over the same period the year
before (Q3: +1.4%) and mining reverted from the 0.9% contraction in the
third quarter to 1.2% growth in Q4.
Services sector weakens despite a
pick-up in financial services
Services dropped at an annual rate of 0.8% in the
fourth quarter, following a more moderate 0.3% decline in the third
quarter. The deterioration in performance was driven by transport,
storage and communications, which dropped off into negative territory in
the fourth quarter (-0.6% yoy) after having registered a 1.0% expansion in
third quarter. Commerce, restaurants and hotels also deteriorated from
the already weak performance in the third quarter (-4.5% yoy), with
activity dropping by 5.6% in the fourth quarter. Financial services
activity, on the other hand, picked up, adding 4.8% over the fourth
quarter 2000. Community, social and personal services repeated the weak
0.2% performance of the third quarter.
Data for supply and demand have not been published yet.
However, investment figures point out that the slide in investment
observed since the second quarter 2001 remained in full swing through the
end of the year. According to preliminary numbers, gross fixed investment
declined at an annual rate of 9.2%, even worse than the 8.9% contraction
registered in the third quarter.
More optimistic outlook in the United States prompts first upward
revision to growth outlook in more than a year
For 2001,
gross domestic product (GDP) contracted 0.3% following on the record 6.6%
(revised downward from 6.9%) growth achieved in 2000. For this year,
Consensus Forecast panellists expect the country to pull clear from the
recession. The current recession would thus represent the shortest and
mildest downswing experienced by Mexico in the past decades. As signs
that the recession in the United States is already drawing to an end are
accumulating – some observers even argue a US recession never existed –
the prospects for the Mexican economy are improving. In fact, the more
optimistic outlook for the US economy has prompted panellists to revise
their growth outlook for this year upward. The 0.05 percentage points
upgrade, however, is still very cautious. While very small, the upward
revision represents the first upward movement in the outlook in more than
a year. According to the forecasts, Mexico will experience one more
quarter with negative economic growth followed by a solid recovery in the
following months, which will help lift economic growth to a healthy level
by the end of the year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Mexico. For more details please click here.
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