Mexican Economic Growth Lost Steam in 2017 - Update

02/23/18 02:08 PM EST

By Anthony Harrup

MEXICO CITY--Mexico's economic growth slowed in 2017 as declines in oil production and construction weighed on industrial activity, while services expanded at a slower rate than the previous year, the National Statistics Institute said Friday.

Gross domestic product, a broad measure of output in goods and services, rose 1.5% in the fourth quarter from the year-earlier period, bringing full-year growth to 2.0%. Mexico's GDP grew 2.9% in 2016.

Services were the main driver of growth last year, increasing 3% from 2016, while industrial production contracted 0.6% on weakness in oil and gas output and a drag on construction from government budget cuts. Manufacturing output accelerated, however, rising 2.9% after growing 1.5% in 2016.

Activity picked up in the fourth quarter following a contraction in the previous period when two major earthquakes and several hurricanes hurt oil production and services. GDP expanded 0.8% seasonally adjusted from the third quarter, which translates into an annualized rate of 3.2%.

Despite being the slowest growth in four years, last year's performance was "notable" considering rising inflation, higher interest rates, government budget restraints and investor uncertainty stemming from the renegotiation of the North American Free Trade Agreement as well as the leadup to Mexico's presidential elections, Goldman Sachs economist Alberto Ramos said in a report.

Those obstacles were partly offset by record job creation and family remittances from Mexicans living in the U.S., both of which supported consumption. Mr. Ramos expects a rebalancing ahead, with more help from manufacturing industries and exports but less from services and private consumption.

Economists polled last month by the Bank of Mexico estimated that the economy will grow around 2.3% in 2018, with a stronger performance in the second half of the year.

Write to Anthony Harrup at

(END) Dow Jones Newswires

February 23, 2018 14:08 ET (19:08 GMT)

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