|
Exports drive growth in final quarter last year, consumption tapers off
Data for supply and demand released in mid-March confirmed the 1.9% annual
GDP growth reported earlier for the final quarter last year. Aggregate
demand expanded 2.1% over the fourth quarter 2001, which represents a
slowdown from the 2.6% annual growth registered in the third quarter.
Moreover, data were inflated by a strong restocking by companies.
Consumption growth also slowed from 1.7% growth in the third to 0.8% in
the final quarter, as both private and government consumption deteriorated
compared to the previous quarter. On a positive note, gross fixed
investment improved, as the zero growth in the fourth quarter compared
favourably with the 0.8% contraction in third. Exports constituted the
main driver behind fourth quarter growth, adding 3.4% over the fourth
quarter 2001, as the external sector profited from a cautious recovery of
the U.S. economy and an increase of the oil price compared to the same
period the year before. However, the export performance pales in
comparison to the 6.0% growth reached in the third quarter, and confirms
that the effect of a U.S. recovery remains erratic at best. In fact, the
uncertainty over US economic developments and their impact on Mexico
constitute the main impediment for a stronger recovery of private
consumption in the first half this year, exacerbated by a slow pickup in
employment and real wages. Consequently, Consensus Forecast panellists
believe that consumption will grow by only 3.2% in the first half, firming
to a more robust 3.6% in the second half. Subdued levels of consumption
are likely to keep a lid on investment. According to this month’s
forecast, gross fixed investment should gain 3.0% in the first half before
optimism about economic development next year lifts the growth rate to
5.8% in the latter half of the year.
First data for 2003 suggest moderate growth in first half accelerating to
a more robust expansion in the second
First data for 2003 do not augur well for a fast recovery. In January,
industrial production advanced only 0.3%, following the more robust 1.7%
growth in December. On a positive note, growth in the construction sector
continued to accelerate for the fourth consecutive month. That said, the
January data was well below Consensus expectations of 1.2% annual growth.
Activity in the non-maquiladora manufacturing industry actually declined
over the same month last year and was down from December, which indicates
that domestic demand remains weak. The maquiladora (in-bond) industry also
deteriorated compared to December, albeit at a less pronounced pace than
observed in domestic manufacturing, which suggests that hopes of an
export-led recovery must be postponed. Nevertheless, according to
seasonally adjusted data, activity in the industrial sector as a whole
increased 0.24% over the preceding month, equivalent to an annual rate of
3.0%, well ahead of the current Consensus Forecast for this year, which
was lowered 0.6 percentage points since last month to 2.4%. The
chronological forecast pattern observed in industry reflects other real
sector indicators: moderate but positive growth in the first half,
accelerating in the second half of the year. Consequently, this growth
blueprint is also reflected in the performance of the overall economy,
which is expected to step up the pace in the second half. For the full
year, the Consensus expects the economy to expand at a rate which is
significantly more pessimistic than the government forecast of 3.0%
confirmed in early April, as panellists have lowered their forecasts by
0.4 percentage points over last month.
Inflation continues to rise in March amid higher fuel prices
In March, consumer prices increased 0.63%. The rise was more than twice
the increase registered in February and exceeded market expectations of
0.45%. Because of the March price spike, annual headline inflation rose to
5.6% from 5.5% in February. Next to rising fruit and other food items
prices, increasing fuel prices pushed the general consumer price level
higher. Consequently, the core inflation index, which excludes fuels and
fresh fruits and vegetables, increased a more subdued 0.44% in March and
annual core inflation remained virtually unchanged from February at 3.5%.
Consensus Forecast panellists have maintained their year-end inflation
projection but the figure remains persistently above the Central Bank’s
3.0% target.
Exchange rate ends weakening string
In March, the peso ended the 10-month slide, which had reduced its value
versus the US$ by 18.2% in nominal terms. After having reached an all time
high of 11.23 pesos to the US$ on 6 March, the currency gained ground
throughout the remainder of the month ending March at 10.76 pesos per US$,
a net nominal appreciation of 2.4% in the month. Moreover, expectations
are also stabilising. This month’s year-end peso forecast indicates a
stronger year-end exchange rate for the first time in months.
|
