Mexico Cuts 2014 GDP Forecast as Growth Misses Analyst EstimatesBrendan Case and Eric Martin
The Mexican government cut its forecast for 2014 growth after the economy expanded less than analysts estimated for the eighth time in 10 quarters, held back by weak domestic demand. The peso pared its advance.
Mexico will grow 2.1 percent to 2.6 percent this year, down from a previous forecast of 2.7 percent, Deputy Finance Minister Fernando Aportela said at a news conference in Mexico City. Gross domestic product rose 2.2 percent in the third quarter from a year earlier, compared with the 2.3 percent median estimate of 24 economists surveyed by Bloomberg.
Growth faltered in September, with the IGAE indicator, a proxy for GDP that was also reported today, dropping 0.1 percent from a month earlier, the second straight decline. Latin America’s second-largest economy is struggling to rebound from 1.4 percent growth last year, the slowest expansion since the 2009 recession, even after the central bank cut its key rate to a record low 3 percent in June.
“The economy has no momentum going into the fourth quarter,” Carlos Capistran, the chief Mexico economist for Bank of America Corp. in Mexico City, said in an e-mailed response to questions. “Services and industry remain weak.”
The peso pared its gain after Aportela’s comments and strengthened 0.1 percent to 13.6401 per U.S. dollar at 12:28 p.m. in Mexico City.
The central bank, led by Governor Agustin Carstens, also cut its growth forecast range this week, saying indicators of domestic demand such as consumer confidence remain weak even as exports have picked up. The bank said the economy will expand 2 percent to 2.5 percent this year, compared with its previous forecast of 2 percent to 2.8 percent.
Speaking at an event today, Carstens said the Mexican economy has better days ahead as the nation moves forward on economic overhauls, which include opening the state-controlled energy industry to private investment and spurring more competition in telecommunications.
“Economic growth had a slight slowdown this quarter, but Banco de Mexico is confident it will retake its way forward,” Carstens said. “That’s why we have forecast bigger growth for next year and even bigger growth for 2016, precisely because we are confident in the structural reforms.”
The government expects Mexico’s economy to grow 3.2 percent to 4.2 percent next year, Aportela said.
Recent data reports “reflect an acceleration of the economy and above all a balanced acceleration of the economy from domestic factors as well as external ones,” Aportela said. “The available information we have from October and November implies stronger growth in the fourth quarter.”
Services activity including commerce, transportation and banking increased 2 percent in the third quarter from a year earlier, according to the statistics institute. Industrial activity such as mining, construction and manufacturing increased 2 percent, and agriculture and livestock grew 7.3 percent.
The U.S., the buyer of about 80 percent of Mexico’s exports, grew at a 3.5 percent annualized rate from July through September, continuing a rebound from the first quarter when it shrank 2.1 percent as harsh winter weather chilled demand.
Wal-Mart de Mexico SAB, Latin America’s largest retailer, was one of the companies affected by Mexico’s economic weakness in the third quarter, with net income falling 5 percent, trailing analysts’ estimates for a fourth straight quarter.
“The consumer in Mexico remains challenged,” Scot Rank, the company’s chief executive officer who plans to leave his post at the beginning of 2015, said on an Oct. 17 conference call with analysts.