Political Risk Latin America Blog @PolRiskLatam

Mexico economy: Petering out?

Posted in Political Risk by politicalrisklatam on August 31, 2010

by The Economist Intelligence Unit, August 31st, 2010.

Mexico’s economic indicators have continued to register elevated year-on-year growth, but the month-on-month results have been disappointing. This suggests that although conditions have improved significantly over the past year, output could be weaker than the government expects in the second half of 2010, mainly reflecting a renewed slowdown in external (particularly US) demand.

In June, Mexico’s industrial production (on a seasonally adjusted basis) declined by 0.4% compared with the previous month, potentially indicating an end to the inventory rebuilding that had boosted production in prior months. The sharpest declines were in construction (1.4%) and mining (1.2%). Manufacturing also edged down slightly (0.1%). On a year-on-year basis, industrial production increased by 8.2%, but this reflected a low base of comparison, as output had contracted by 10.3% in June 2009.

Similar to every month this year, the year-on-year growth rates have been lower than the comparable rates of contraction in 2009. This indicates that the economy is staging only a partial recovery from last year’s recession (when overall GDP shrank by 6.6%). Industrial production remains 3.6% below its pre-crisis peak.

The aggregate trend indicator in the manufacturing sector (which reflects production volumes, capacity utilisation, domestic and external demand, and employment levels) has also wavered in recent months, falling from 54.1% in May to 53.9% in June and 53.1% in July. Producer sentiment regarding expectations for future manufacturing orders has also deteriorated recently. (continue reading… )

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