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Mexico's economy grows 2.2% annually in the third quarter

Mexico's economy grows 2.2% annually in the third quarter

Posted by Ricardo Vázquez on November 21, 2014

The third-quarter growth was slightly below the 2.3% median estimate of 11 economists polled by The Wall Street Journal, and brought the expansion for the first nine months of the year to 1.9%.

Gross domestic product expanded 2.2% in the July-September period, compared with the third quarter of 2013, and was up 0.5% from the second quarter in seasonally adjusted terms, the National Statistics Institute said Friday.

The 0.5% growth from the second quarter, which translates into an annualized rate of 2%, marked a slowdown from the 0.9% seen in the preceding three-month period.

Manufacturing, particularly in the automotive industry, has been a driver of growth this year, and construction has begun recovering from a 2013 slump, increasing 4% in the third quarter from a year before. Those gains were offset by lower oil and gas production. Overall industrial output rose 2%, as did services, while agricultural production rose 7.3%.

The Bank of Mexico this week lowered its full-year growth estimate to between 2% and 2.5%, from its previous forecast of 2% to 2.8%. The Finance Ministry is expected to revise its 2.7% full-year forecast later Friday.

The economy appears on track to register its second consecutive year of below-estimate growth, which has been held back by a sputtering recovery in the global economy, and by sluggish domestic consumption and investment.

The central bank said it expects the legal overhauls made in areas such as energy and telecommunications to start having a positive effect on growth in 2016.

Economists said the results bode well for the quarters ahead, although the recent sharp drop in oil prices and concerns about security issues in Mexico could provide headwinds.

“The Mexican economy still has room for further improvement, and security concerns pose downside risks to sentiment and economic activity. But the trend in Mexico, broadly speaking, still seems toward incrementally stronger growth,” said Bill Adams, senior international economist for PNC.

Capital Economics emerging market economist Davis Rees said in a note that with demand from the U.S. set to strengthen, the economy is poised to gain momentum and “Mexico should be the region’s stand out performer over 2015-16.”

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