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Economy
picks up speed in first quarter
A more
complete data set for national accounts confirmed the 3.7% annual first
quarter growth reported last month. The reading represents an
improvement compared to the 2.0% growth registered in the fourth quarter
and confirms that the economy bottomed out in the second quarter of 2003,
when economic activity was virtually unchanged over the same period in the
prior year.
Higher
exports compensate for weaker consumption
Increased
export growth and a lower reduction in inventories drove the improvement
in first quarter growth compared to the preceding quarter. However,
in contrast to the fourth quarter of last year, the domestic side of the
economy also accelerated. Total consumption growth added a notch
from 3.1% in the fourth quarter to 3.2% in the first. The virtually
unchanged growth rate hides significant changes in the composition of
consumption. While private consumption accelerated from 3.2% growth
in the fourth quarter to 3.7% in the first, government consumption
actually deteriorated from a 2.8% expansion to a 0.3% contraction in the
first quarter, despite increased government spending power in the wake of
higher oil revenues. Gross fixed investment grew at a robust 4.5%,
which was well beyond the lacklustre 0.8% registered in the preceding
quarter. In fact, investment growth experienced the fastest
expansion observed since 2000. Quarter-on-quarter data corroborate
the annual figures. According to seasonally adjusted data, gross
fixed investment added 2.52% over the preceding quarter, which is
equivalent to an annual growth rate in the double-digit range. The
external sector also continued to exhibit the positive development.
Exports of goods and services grew at the fastest pace in more than three
years (Q1: +10.4% year-on-year, Q4: +4.6% yoy). Import growth more
than quadrupled since the Mexican export industry depends largely on
imported intermediate goods as inputs.
Economy
develops along expectations in April
In April,
economic activity increased 4.2% over the same month last year, according
to the global indicator for economic activity (IGAE, Indicador Global de
la Actividad Económica). The reading was in line with expectations
but was below the very strong 5.5% annual growth observed in March, which
had been the best reading since October 2000 and had raised hopes that the
Mexican economy was finally benefiting from the robust recovery in the
United States. A month-on-month comparison corroborates the annual
data. According to seasonally adjusted figures, the economy expanded
0.46% over the preceding month, following on the record 2.48% monthly
increase in March. In fact, the March seasonally adjusted growth
rate was the highest ever registered since the National Statistical
Institute (INEGI) started elaborating this indicator in 1993.
Recovery
of industrial sector continues to take a firmer hold
In April,
agriculture was the only sector that accelerated over the preceding month,
growing 6.6% over the same month last year (March: +4.3% year-on-year).
Services and industry, on the other hand, decelerated. Services
added 4.3% over the same month last year, well below the 5.4% expansion
observed in March, while the industrial sector increased 4.0%, which was
2.4 percentage points below the growth rate registered in March.
However, the 6.5% March growth rate represented the fasted pace registered
since October 2000, when the economy was still booming. According to
seasonally adjusted data, the industrial sector added 1.33% over the
previous month, as the upward trend that began towards the end of last
year is taking a firmer hold.
Manufacturing
industry benefits from growing U.S. manufacturing sector
Current
developments in the manufacturing industry are promising. In April,
manufacturing added 1.80% over the preceding month in seasonally adjusted
terms and thus even improved over the already robust March reading (+1.53%
month-on-month). During the past business cycle, the sector seemed
to have decoupled from the U.S. manufacturing industry, which itself had
lagged behind the general economic recovery. However, recent data
suggest that Mexico is following the increasingly promising developments
in the U.S. manufacturing industry. In June, the Institute for
Supply Management (ISM) Purchasing Managers' Index (PMI) indicated that
economic activity in the U.S. manufacturing sector grew for the 13th
consecutive month. While the PMI for June registered a decrease of
1.7 percentage points compared to the May reading of 62.8 points, the 61.1
points put the index well above the 50 percent threshold that indicates
that the manufacturing economy is expanding. If the recovery in U.S.
manufacturing persists through in the second half of the year, the
tentative recovery of the Mexican manufacturing industry could take a
firmer hold. However, even so, the recovery will remain moderate.
Consensus Forecast panellists expect the entire industry to grow by 4.2%
this year, as Mexico continues to lose market share in the U.S. economy to
competitors in China and Southern Asia. |
