With 4th-Quarter Recovery, Mexican Economy Grew 2.1% in 2017--Update
By Anthony Harrup
MEXICO CITY--The Mexican economy staged a recovery in the fourth quarter, expanding at its fastest pace in a year as the country shook off the impact of natural disasters that contributed to a contraction in the previous quarter.
Gross domestic product, a measure of output in goods and services, expanded 1.0% seasonally adjusted from the third quarter and was up 1.8% from the fourth quarter of 2016, the National Statistics Institute said Tuesday.
The increase from the previous quarter, which translates into an annualized rate of 4%, was the biggest since the fourth quarter of 2016.
For all of 2017, the economy expanded 2.1%, a slowdown from 2016 when GDP grew 2.9%. A drop in oil and gas production, and the impact of government budget cuts on construction activity, contributed to a 0.6% decline in full-year industrial production. Services remained the main driver of growth last year, increasing 3.1% from 2016.
Last year's growth was also negatively affected by rising inflation and higher interest rates as the central bank responded to price pressures.
"Even if the Bank of Mexico does not raise interest rates again at next month's policy meeting, the lagged effects of previous tightening will start to weigh on consumer spending...over the coming months," Neil Shearing, chief emerging markets economist at Capital Economics said in a note.
Growth is expected to improve modestly to around 2.2% in 2018, a year marked by negotiations to redraw the North American Free Trade Agreement with the U.S. and Canada, and Mexican presidential elections in July.
"Economic growth will remain subdued throughout the first half of the year, weighed down by uncertainty, high inflation and softening employment gains," analysis and forecasting firm FocusEconomics said in its January outlook for Mexico. "
Analysts expect growth to then pick up in the second half of the year as inflation gradually eases and political noise recedes, which should allow the central bank to ease monetary conditions, further boosting the economic recovery," it added.
Economists at JP Morgan said the preliminary fourth-quarter data showed a strong finish to last year, and raised their estimate for 2018 growth to 2.4% from 2.2%.
"We still think uncertainty around Nafta/elections could weigh down activity, but it seems global cyclical conditions and the likely rapid drop in inflation -- and the expected boost to consumption -- should have a larger bearing," they said.
The statistics institute is scheduled to publish its next report on fourth quarter GDP on Feb. 23.
Write to Anthony Harrup at firstname.lastname@example.org
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January 30, 2018 13:42 ET (18:42 GMT)Copyright (c) 2018 Dow Jones & Company, Inc.