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Economy
in line with expectations in September
In September,
economic activity increased 4.4% over the same month last year, according
to the global indicator for economic activity (IGAE, Indicador Global de
la Actividad Económica). The actual reading was bang in line with
expectations, and was one percentage point below the August reading, which
was revised slightly upwards. A month-on-month comparison, however,
does not confirm the strong reading. According to seasonally
adjusted data, the economy actually contracted by 0.11% over the preceding
month, following on 0.59% growth in August. Despite the soft spot in
September, the upward trend remains intact. In September, the annual
average growth rate inched up 0.2 percentage points from 3.4% in August to
3.6%, the eleventh consecutive monthly increase.
Upward
revisions to July and August data lift third quarter growth above
estimates
Third quarter
gross domestic product (GDP) growth of 4.4% came in a notch ahead of
market expectations since the final numbers also brought a 0.2 percentage
point upward revision to the July and August reading respectively.
The third quarter pace was half a percentage point faster than the 3.9%
annual growth rate observed in the second quarter of the year.
However, according to seasonally adjusted data, the economy expanded at a
less vigorous rate than suggested by the annual data, as the National
Statistical Institute (INEGI) reported only 0.64% growth over the
preceding quarter, following on 1.12% quarterly growth in the second
quarter.
Industry
continues recovery
The
industrial sector expanded a robust 4.8% in the third quarter over the
same quarter last year. The reading was a full percentage point
above second quarter growth and thus continued the upward trend observed
since the second quarter last year, when the sector was mired in recession.
However, not all sub-sectors that constitute the industrial sector
improved over the second quarter. Mining slowed from an already
sluggish 2.4% pace in the second to a paltry 1.6% expansion in the third
quarter. Construction and the electricity, gas and water sector, on
the other hand, experienced an acceleration in activity.
Construction added 5.9%, following on 4.4% growth observed in the second
quarter and electricity, gas and water accelerated from 0.8% growth to
2.8%.
Manufacturing
continues acceleration trend amid strong rebound of maquiladora industry
The pace in
industrial manufacturing continued to quicken. Since the second
quarter 2003, when the sector was deeply entrenched in recession,
industrial manufacturing has quickly gained speed to reach 4.0% growth in
the second quarter. In the third quarter of this year, growth
accelerated further to 5.0%, the fastest expansion observed since the
third quarter of 2000. Moreover, the so-called maquiladora industry
(in-bond manufacturing) is recovering at twice the pace observed in
manufacturing as a whole. The maquiladora industry directly serves
the U.S. market and thus acts as a good indicator for measuring to what
extent the rebound in the United States is finally being transmitted to
the Mexican economy. In the third quarter, activity in the
maquiladora industry grew 10.2%, following on 9.3% growth in the second
quarter. The figure was also the highest reading since the end of
2000.
Services
grow at quicker pace than in the second quarter
Services
expanded 4.8% in the third quarter over the same quarter last year,
following on 4.1% in the second. Growth in the transport, storage
and communications sector accelerated from the already robust 8.2%
registered in the second quarter to a very strong 9.3% in the third.
According to INEGI, the sector profited from strong growth of fixed line
and cellular telephone services. Commerce, restaurants and hotels
expanded 4.9%, which was a well above the 4.0% expansion observed in the
second quarter. The slight acceleration was mainly due to higher
sales volumes related to the external sector and higher hotel occupancy
levels. Growth in financial services and real estate, in contrast,
decelerated from 5.0% in the second quarter to 4.4%.
Leading
indicators point upward but consumer confidence continues to decline
Consumer
confidence and leading indicators provide a mixed picture of the immediate
outlook for the economy. The leading and coincident indicators for
September, published on 3 December augur well for a further acceleration
in economic activity. The coincident indicator that tracks the
current developments in the economy was up 0.35% over the preceding month
in seasonally adjusted terms. The rise was due to favourable
developments in all categories that comprise the index with the exception
of the economic activity index. The leading indicator that tries to
anticipate future developments in the economy increased 0.95% over the
preceding month, as five of the six components developed favourably.
Consumer confidence, in contrast, declined yet again. In November,
the overall index of consumer confidence reached 95.3 points, down from
95.4 points in October. While only a small decline, the November
reading continues a series of lower consumer confidence that was only
briefly interrupted in September.
Consensus
more optimistic about economic prospects
The
better-than-expected third quarter reading and the continued strong
international setting have prompted Consensus Forecast panellists to raise
their forecasts for economic growth this year another notch over last
month to 4.1%, which is in line with the latest government assessment
saying that the economy will grow more than 4% this year. The panel
maintained growth prospects for next year unchanged at 3.6%, which remains
below the 3.8% government forecast underlying the budget proposal.
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