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Mexico

Economic Update

January 2012

Summary
The latest data suggest a pickup in activity in the fourth quarter. Industrial production ticked up, exports rose in
November, and employment grew strongly in December. The peso fell relative to the dollar in December, and
inflation increased considerably in November and December. Retail sales dipped in October.

Mexico GDP

Year/year percent change

10
Q4 forecast

8

6
4
2
0
-2
-4

The fourth quarter 2011 gross domestic
product forecast calls for 3.6 percent
growth over the same period last year,
which means the year would close with
overall growth of 3.9 percent. Second-half
growth is expected to average 4.1 percent,
slightly higher than the 3.9 percent average
annual growth seen the first six months of
2011.

-6
-8

-10
2007

2008

2009

2010

2011

Mexico Exports
Exports rose 2 percent in November.
Manufacturing exports increased 2.4
percent, while oil exports grew 9.4
percent. Over the year (through November), exports grew 14.7 percent, a
substantially slower pace than the 29
percent growth seen during the same
period in 2010. Oil and manufacturing
exports rose 33.5 percent and 10.9
percent through November, respectively.

Index, January 2000 = 100

350
300

Oil

250

Total

200

Manufacturing

150
100

50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mexico Industrial Production

Index, January 2000 = 100

120
Total

115
Manufacturing

110
105

U.S. industrial
production

100
95

90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Industrial production (IP) edged up 0.1
percent month over month in November after falling 0.5 percent in October.
U.S. IP fell 0.2 percent in November
after growing 0.6 percent in October.
Mexico’s industrial production typically
tracks U.S. IP, due in part to the U.S.
automotive industry’s large presence in
Mexico.

Mexico Retail Sales
Index, January 2000 = 100

Retail sales fell 0.1 percent in October after
rising 1 percent in September. Retail sales
grew 2.3 percent in 2011 (through October). Consumer confidence fell 0.7 percent
in December. Growth in domestic consumption has been an important part of
Mexico’s recovery since the 2009 financial
crisis.

140
135

130
125
120
115
110
105
100
95
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Formal-sector employment closed the
year strongly, growing at an annualized rate of 5.6 percent in December
(month over month). In the fourth
quarter, employment grew at a 4.3
percent quarter-over-quarter, annualized rate, up from 3.5 percent growth
in the third quarter and 3.7 percent
growth in the second. Mexico added
over 590,000 jobs in 2011.

Mexico Formal Employment

Annual growth rate (percent)

10
8
6

4
2
0
-2
-4
-6
-8

-10
-12
2007

peso/dollar average

2008

2009

2010

2011

Peso/Dollar Exchange Rate

16
15

December: 13.8

14
13
12

The peso has weakened considerably against
the dollar since July. The exchange rate averaged 13.8 pesos per dollar during December,
down from an average of 13.6 in November.
The peso has depreciated 9.8 percent
against the dollar since December 2010 and
15 percent since July 2011.

11
10
9

8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Mexico Consumer Price Index
Year-over-year percent change

Prices rose 3.8 percent year over year in December after increasing 3.5 percent in November.
Higher food prices pushed up the consumer
price index, although household goods and
health care prices also spiked. Inflation has
been accelerating with the weakening peso.

12
10
8

6
4
2

Long-term target

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
NOTES: All data are seasonally adjusted except exchange rate. GDP, exports and retail sales are in real terms.
SOURCES: Gross domestic product, industrial production, consumer price index and retail sales: Instituto Nacional de Estadística y Geografía; exports, exchange
rate: Banco de México; formal employment: Instituto Mexicano del Seguro Social; U.S. industrial production: Federal Reserve Board.
Questions can be addressed to Jesus Cañas at jesus.canas@dal.frb.org. Mexico Economic Update is released the week preceding regularly scheduled Federal
Open Market Committee meetings.