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Mexico Fourth-Quarter GDP Accelerated Faster-Than Expected

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Feb. 18 (Bloomberg) -- Mexico’s economy accelerated more than analysts expected in the fourth quarter, led by a jump in agriculture output that lifted 2012 growth to 3.9 percent.

Gross domestic product rose 0.8 percent from the third quarter, an annualized rate of 3.1 percent, the national statistics agency said today on its website. The gain was more than the 0.6 percent median estimate in a Bloomberg survey of seven economists. Farming and fishing grew 2.1 percent from the previous quarter, services expanded 0.7 percent and manufacturing, mining, construction and utilities contracted 0.2 percent.

Analysts surveyed by Bloomberg expect Mexico’s economy, which expanded faster than Brazil’s in 2012 for a second consecutive year, to decelerate in 2013. Slowing inflation and concern that the second biggest Latin American economy will be dragged down by stalled growth in the U.S led traders to increase bets that Banco de Mexico may cut interest rates this year for the first time since 2009.

“Mexico again had a good year of expansion,” Carlos Capistran, chief Mexico economist at Bank of America Corp., said in an e-mail. “When you analyze and see that industry and services are weak, and that the aggregate number wasn’t bad because agriculture went very well, this will ratify expectations that the central bank will cut interest rates.”

Rate Swaps

Three-month interest-rate swaps, which reflect traders’ expectations on monetary policy, fell 16 basis points below the benchmark 28-day interbank rate last week, the lowest level since 2009, suggesting traders are growing more confident that central bank governor Agustin Carstens will reduce borrowing costs before June.

The Mexican peso weakened 0.1 percent to 12.6971 per dollar at 11:45 a.m. in Mexico City today. Yields on Mexican government notes due in 2013 rose one basis point, or 0.01 percentage point, to 4.27 percent. Mexico’s bond market attracted a record $8.78 billion last year from overseas investors tracked by EPFR Global.

The economy grew 3.2 percent from the same quarter the previous year, matching the pace registered in the July to September period after a revision.

Banco de Mexico reiterated Feb. 13 it may cut its target rate from a record-low 4.5 percent if inflation continues to slow toward its 3 percent target. Consumer prices rose 3.25 percent in January, the slowest pace since Oct. 2011.

U.S. Slowdown

The central bank said it’s more probable that growth will decelerate this year given the risks of slower expansion in the U.S.

Gross domestic product in the U.S. dropped at a 0.1 percent annual rate in the fourth quarter, the worst performance since the second quarter of 2009, as the biggest plunge in defense spending in 40 years swamped gains for consumers and businesses.

Mexican industrial production unexpectedly fell in December from the year earlier for the first time in three years. More recent automobile production figures have signaled a pickup in manufacturing. Production of cars and light trucks increased 19.8 percent in January from a year earlier, the country’s automobile industry association said on Feb. 7.

Mexico will expand 3.5 percent this year, according to analysts surveyed by Bloomberg, matching Brazil, which grew 1 percent last year, the survey shows.

“The story about a rate cut is not about stimulating the economy, it’s about recognizing the achievement on inflation,” Alonso Cervera, an economist at Credit Suisse Group AG., said in a telephone interview from Mexico City.

To contact the reporter on this story: 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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