Mexico Economy Grows Less Than Expected as Industry Contracts

Mexico’s economy grew less than forecast by any of the analysts surveyed by Bloomberg in the second quarter as industrial production declined on a sluggish U.S. recovery.

Gross domestic product expanded 1.5 percent from the year earlier, rebounding from a revised 0.6 percent growth rate in the previous three months, the National Statistics Institute said on its website today. The median estimate of 17 economists surveyed by Bloomberg was for growth of 2.3 percent. The economy contracted 0.7 percent from the previous quarter.

The central bank cut its growth forecast for this year to between 2 percent and 3 percent this month from 3 percent to 4 percent on stagnant exports to the U.S. and muted public spending. Growth will accelerate in both the third and fourth quarters, rising to 4 percent next year as the U.S. recovery strengthens and the government passes key economic reforms, according to the median estimate in a Bloomberg survey.

Industrial production fell 0.6 percent in the second quarter from the year earlier, the statistics agency also said today. The construction sector contracted 4 percent over the same period amid a drop in government spending.

Mexican exports increased just 0.6 percent in the first six months of the year, the slowest start to a year since the 2009 recession and compared with 7 percent growth in the first half of 2012.

The peso pared its gain from as much as 0.8 percent today, strengthening 0.4 percent to 13.0296 per dollar at 8:12 a.m. in Mexico City.

Central Bank Governor Agustin Carstens said Aug. 7 that a slowdown in government spending had hurt the construction sector. The trend should reverse in the second half of the year as public spending picks up, he said.

“We expect that public construction won’t remain an impediment to economic growth, but on the contrary, start boosting the economy,” Carstens said.

The statistics agency updated its base year in today’s report to 2008 from 2003, revising past GDP figures

To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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