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Mexico Economy Improves in Second Quarter
September 22, 2014
Mexico’s economy expanded at a much faster rate in
the second quarter than in the first. Recent data
point to continued growth, with industrial production,
employment, exports and retail sales all growing in
July and August. Inflation ticked up, and the peso
lost ground against the dollar in August.

Chart 1
Gross Domestic Product Growth Improves in Second Quarter
Annualized growth rate (percent)
10

5

0

Output Posts Solid Growth
Mexico’s economy grew 4.2 percent in the second
quarter, compared with a revised 1.8 percent rate in
the first (Chart 1). Service-related activities
(including trade, transportation and business services) grew 4.3 percent, while goods-producing industries (including manufacturing, construction, utilities and mining) grew 4.1 percent. Agricultural output expanded 3.7 percent in the quarter. Despite the
pickup in overall activity, the consensus forecast for
gross domestic product growth in 2014 was revised
down from 2.6 percent in July to 2.5 percent in August.

-5

-10

-15

-20
2007

2011

2012

2013

2014

350

300

Exports grew 1.5 percent in July after coming in flat
in June. Three-month moving averages reveal a continued steep decline in oil exports, while total exports
have been expanding since the beginning of the year
(Chart 2). Year to date, total exports have grown 2.9
percent, with manufacturing exports up 4.6 percent.
Oil exports declined 10.1 percent during the first seven months of 2014.

200

Federal Reserve Bank of Dallas

2010

Index, January 2000 = 100*

250

Mexico’s industrial production (IP) grew 0.3 percent
month over month in July after slipping 0.2 percent
in June. Three-month moving averages show a broad
pickup in total IP, which also includes construction,
oil and gas extraction, and utilities. Manufacturing IP
continued to increase faster than total production
(Chart 3), and construction IP (not shown) is growing
again. Meanwhile, U.S. IP fell 0.1 percent in August

2009

Chart 2
Total Exports Growing as Oil Exports Continue Falling

Exports Rise Despite Decline in Oil Trade

Industrial Production Showing Improvement

2008

SOURCE: Instituto Nacional de Estadística y Geografía.

Oil

Total

150

100

Manufacturing

50
*Seasonally adjusted, three-month moving average; real dollars.
SOURCE: Instituto Nacional de Estadística y Geografía.

after rising 0.2 percent in July. Mexico’s industrial production typically tracks U.S. industrial production, due in
part to the U.S. automotive industry’s large presence in
Mexico.
Retail Sales Tick Up
Retail sales rose 0.2 percent in June after posting flat
growth in May. The three-month moving average, which
was essentially flat for all of 2013, has shown some im-

Mexico Economic Update

1

Chart 3
Industrial Production Rises as Manufacturing Takes Off
Index, January 2000 = 100*
130
125

Manufacturing IP

120

provement since March (Chart 4). Year over year, retail sales are up 1.4 percent. Consumer confidence
worsened in August for the second consecutive
month.
Job Growth Slows in August

Total

115
110
105

U.S. IP

100
95
90

Formal sector employment—jobs with government
benefits and pensions—grew at an annualized rate of
3.1 percent in August, faster than the annual rate of
2.9 percent in 2013 but slower than the 4 percent average so far in 2014 (Chart 5). Formal sector employment grew 4.6 percent in 2012.
Peso Depreciates Slightly

*Seasonally adjusted, three-month moving average.
SOURCES: Instituto Nacional de Estadística y Geografía; Federal Reserve Board.

The peso fell 1.1 percent against the dollar in August
as the exchange rate declined from 13 pesos per dollar in July to 13.1 in August (Chart 6). Since December, the peso has been stable—losing only about 1
Chart 4
Retail Sales Showing Some Improvement

Chart 6
Dollar Is Up Versus Peso in August

Index, January 2000 = 100*

Peso/dollar average
16

150

15

140

14
130

13
120

12
11

110

10

100

9
90

8
*Seasonally adjusted, three-month moving average; real pesos.
SOURCE: Instituto Nacional de Estadística y Geografía.

SOURCE: Banco de México.

Chart 7
Inflation Picks Up in August for Third Consecutive Month

Chart 5
Job Growth Slows After the First Half of 2014

Year/year percent change
12

Percent*
10

10
5

8
0

6
-5

4
-10

2
-15
2007

2008

2009

2010

*Month/month; seasonally adjusted, annualized rate.
SOURCE: Instituto Mexicano del Seguro Social.

Federal Reserve Bank of Dallas

2011

2012

2013

2014

Long-term target

0
SOURCE: Instituto Nacional de Estadística y Geografía.

Mexico Economic Update

2

percent against the U.S. dollar—even as Federal Reserve tapering has adversely affected the currencies
of other emerging economies.
Inflation Picks Up Again in August
Inflation increased to 4.1 percent year over year in
August (Chart 7). Prices excluding food and energy
rose 3.4 percent, which is slightly above the central
bank’s long-term inflation target of 3 percent. Monetary policy has been on hold since Banco de México
lowered the reference rate in June by 50 basis points
to 3 percent to help stimulate economic growth. Policymakers continue to believe that inflation expectations are well-anchored.

—Jesus Cañas
……………………………………………………………………………………...
About the Author
Cañas is a business economist in the Research Department at the Federal Reserve Bank of Dallas.

Federal Reserve Bank of Dallas

Mexico Economic Update

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