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Mexico

Economic Update

March 2012

Summary
Mexico’s economy slowed in the fourth quarter, growing 1.7 percent quarter over quarter. Despite the slowdown, industrial production advanced in December and employment continued its strong growth in January. Exports and retail sales both fell in December and January. The peso has appreciated against the dollar since December, while inflation ticked up further in January.
Mexico GDP

Percent annual growth rate

15
10
5
0
-5
-10
-15
-20
-25
-30
2007

2008

2009

2010

2011

Quarterly growth of 1.7 percent in the fourth quarter was down from 5.1 percent in the third. Agricultural sector output fell sharply and services decelerated, while the industrial sector picked up.
For the year, Mexico’s economy grew 3.9 percent,
slower than the 5.5 percent pace in 2010. The
2011 slowdown was brought about by weaker
growth in manufacturing output and a decline in
oil production. Mexico’s gross domestic product
growth is projected to decelerate to 3.3 percent in
2012, mostly as a result of a weaker U.S. economic
outlook. If U.S. growth surprises on the upside, as
it appears poised to do, Mexico’s projections will
be upwardly revised.
Mexico Exports

Exports fell 1.9 percent in January over
December. Manufacturing exports increased 3.7 percent, while oil exports
fell 3.8 percent. In 2011, exports increased 14 percent, a substantially
slower pace than the 28 percent
growth seen in 2010. Oil and manufacturing exports rose 31 percent and
10.4 percent, 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

Index, January 2000 = 100

Mexico Industrial Production

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 0.8
percent month over month in December after growing 0.1 percent in November. U.S. IP grew 1.1 percent in
December after falling 0.1 percent in
November. 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
Retail sales fell 2.6 percent month over
month in December after growing 3.5 percent in November. Overall, retail sales grew
2.9 percent. Consumer confidence increased
2.6 percent in December. Growth in domestic
consumption has been an important part of
Mexico’s recovery since the 2009 financial
crisis.

Index, January 2000 = 100

150
140
130
120
110
100
90

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

Mexico Formal Employment

Annual growth rate (percent)

Formal-sector employment grew at an
annualized rate of 5.8 percent in January (month over month). Overall, employment grew 4.1 percent in 2011
(December over December). Mexico
added over 600,000 jobs last year.

10

5

0

-5

-10

-15
2007

Peso/dollar average

2008

2009

2010

2011

2012

Peso/Dollar Exchange Rate
The peso has strengthened 8.6 percent
against the dollar since December. The exchange rate averaged 12.8 pesos per dollar
during February, up from an average of 13.5
in December.

16
15

14
13
12
11

February: 12.8

10
9
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mexico Consumer Price Index
Year-over-year percent change

Prices rose 4 percent year over year in January.
Higher food prices continued pushing up the
consumer price index. Food, beverages and tobacco products increased 7.2 percent. Agricultural products jumped 7.4 percent, driven by a
12.7 percent increase in meat and egg prices.
Energy-related products rose 5.8 percent. Without food and energy, prices increased 3.3 percent in January.

12
10
8
6
4

2

Long-term target

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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.