- Economy gets boost from services sector as retail sales rise
- Expansion from previous quarter is the fastest in two years
Mexico’s economy expanded at a faster pace than any economist projected in the third quarter, fueled by a rebound in domestic consumption.
Gross domestic product rose 2.6 percent from a year earlier, the national statistics institute said Friday, topping the highest estimate of 24 economists surveyed by Bloomberg, whose median forecast was 2.4 percent. From the previous quarter, GDP advanced 0.8 percent, the quickest pace since the third quarter of 2013.
Faster expansion in retail sales and consumer credit helped fuel “moderate growth” in the third quarter, Banco de Mexico Governor Agustin Carstens said this month. While growth forecasts have been falling due to declining oil output and sluggish exports, the Mexican economy is still likely to expand 2.3 percent this year, slightly better than last year, according to analyst estimates compiled by Bloomberg.
“It’s a very good number and it shows a recovery trend that may put upward pressure on future growth estimates,” Carlos Serrano, chief economist of Banco Bilbao Vizcaya Argentaria SA’s Mexico unit, said by telephone. “What’s behind this is strong growth in the domestic market, especially in services and consumption.”
The peso strengthened 0.6 percent to 16.5150 per dollar at 11:11 a.m. in Mexico City, the biggest gain among 16 major currencies tracked by Bloomberg.
Deputy Finance Minister Fernando Aportela reaffirmed the government’s forecast for 2015 growth of between 2 percent and 2.8 percent, followed by 2016 expansion of 2.6 percent to 3.6 percent. Barclays Plc raised its 2015 growth estimate to 2.5 percent from 2.3 percent, citing gains in industrial activity and the services sector.
“In a complex, volatile environment, the Mexican economy is growing more than in the same period a year ago, at a faster pace than in the first half of this year and above analyst estimates,” Aportela told reporters in Mexico City. “The economy has been driven mainly by the dynamism of the domestic market.”
The third-quarter growth rate was more than the 2.3 percent preliminary estimate released last month by the statistics institute. Growth accelerated from a revised 2.3 percent pace in the second quarter, according to the statistics institute.
The retail and wholesale sector climbed 4.8 percent in the third quarter from a year earlier, accelerating from a 4.4 percent growth pace in the April through June period. Consumer-oriented companies are posting this year’s biggest gains on the benchmark IPC index of 35 Mexican stocks, led by airport operator Grupo Aeroportuario del Pacifico SAB, tortilla maker Gruma SAB and retailer El Puerto de Liverpool SAB.
Restaurants and hotels advanced 7.1 percent in the third quarter, which Pantheon Macroeconomics Ltd. analyst Andres Abadia attributed partly to a rise in tourism fueled by the weaker peso. Farming and ranching jumped 4.1 percent. Mining, which includes oil production, tumbled 5.6 percent.
The economy expanded 3.1 percent in September, beating all analyst estimates. The Mexican economy will grow 1.9 percent to 2.4 percent this year, the central bank said Nov. 4, narrowing its previous forecast of 1.7 percent to 2.5 percent.
“The Mexican economy is still growing at a healthy pace, thanks to solid domestic demand, offsetting the hit from lower oil prices,” Abadia said in a note to clients. “Global headwinds have hampered Mexican GDP this year, but we think 2016 will be much better, thanks to robust domestic fundamentals, and the strengthening of the U.S. economy, which will drive exports and investments up.”