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Economy
blasts expectations in March
In March,
economic activity increased 5.5% over the same month last year, according
to the global indicator for economic activity (IGAE, Indicador Global de
la Actividad Económica). The actual reading blasted expectations,
which had the economy growing at an annual rate of 3.1% and was well above
the already strong 3.4% annual growth recorded in February. In fact,
the March growth rate represented the best reading since October 2000 and
raised hopes that the robust recovery in the United States is finally
being transmitted to the Mexican economy. A month-on-month
comparison corroborates the annual data. According to seasonally
adjusted figures, the economy expanded at a record 2.48% over the
preceding month, more than compensating the 1.57% monthly contraction
registered in February. In fact, the March seasonally adjusted
growth rate is the highest ever registered since the National Statistical
Institute (INEGI) started elaborating this indicator in 1993.
March
boost lifts first quarter growth above estimates
Owing to the
surprise boost to economic activity observed in March, first quarter gross
domestic product (GDP) growth came in well ahead of market expectations of
2.9%. In the first quarter, GDP expanded by 3.7% over the same
period the year before, almost double the 2.0% annual growth rate observed
in the final quarter 2003. According to seasonally adjusted data,
the economy expanded at an even more vigorous rate than suggested by the
annual data, as INEGI reported strong 1.32% growth over the preceding
quarter. Following on 1.37% quarterly growth in the final quarter
2003, the six-month period constitutes the strongest bout since 2000, when
the economy was in a full bloom.
Industrial
sector continues recovery
Agriculture
expanded by 4.6% over the first quarter 2003, almost unchanged compared to
the 4.8% annual growth observed in the fourth quarter. Industry, in
contrast, experienced a sharp rebound from the anaemic 0.3% growth in the
fourth quarter. In the first quarter, the industrial sector expanded
by a robust 3.2% and thus distanced the two consecutive contractions
registered in the second and third quarter last year, which raises hopes
that the positive momentum will lift the sector from past sluggishness.
All sub-sectors that constitute the industrial sector improved over the
fourth quarter. Within industry, mining led growth with an annual
expansion of 6.4%, following on 5.3% growth recorded in the fourth quarter.
Construction also improved over the fourth quarter, as growth accelerated
from a 3.5% pace to 4.9%. Electricity, gas and water, exited the
slight 0.1% contraction observed in the fourth quarter and grew by 1.4% in
the first quarter.
Manufacturing
industry exits recession
Most notable,
however, is the improvement of the manufacturing industry, a key sector,
as the country tries to emerge from lacklustre growth. The
manufacturing industry left the 0.6% contraction of the fourth quarter
behind and expanded a sound 2.8% in the first quarter of 2004. In
the past year, the lagging recovery of the Mexican manufacturing industry,
in spite of record growth in the United States,
had raised concerns, as it suggested that the Mexican economy had lost a
larger than expected market share in the United States to Asian
competitors. Within manufacturing, the so-called maquiladora
industry (in-bond manufacturing), is particularly important since it
directly serves the United States market and thus acts as a good indicator
for measuring to what extent the rebound in the U.S. is finally
transmitted to the Mexican economy. In the first quarter, activity
in the maquiladora industry grew 2.9%, following on flat growth in the
final quarter 2003. The first quarter reading represented the first
positive growth in more than half a year. Moreover, the growth trend
continues to point upwards, providing a backdrop for more solid growth for
the remainder of this year.
Services
grow at quicker pace than in the fourth quarter
Services
expanded 4.1% in the first quarter over the same quarter last year, which
also marked an improvement when compared to the 2.6% annual growth
registered in the fourth quarter. Transport, storage and
communications sector exhibited the most positive development, as growth
more than doubled from the already resilient 4.7% in the fourth quarter to
buoyant 9.5% growth in the first quarter. According to INEGI, the
sector profited from strong growth of fixed line and cellular telephone
services as well as satellite communications. Growth in financial
services and real estate, in contrast, slowed slightly from 4.7% in the
fourth quarter to 4.3%. Finally, commerce, restaurants and hotels
added 3.8% over the first quarter 2003. |
