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Mexico's Economic Growth Continues at a Moderate Pace
November 2, 2015

Chart 1
Output Grows in July and August

Mexico’s economy continued growing in the third quarter.
The government’s monthly gross domestic product (GDP)
measure increased in July and August. In addition, recent
data on exports, employment, retail sales and industrial
production are all up. Inflation appears firmly under control
despite the peso’s depreciation against the dollar. The consensus 2015 GDP growth forecast held steady in September
at 2.3 percent.

Index, January 2000 = 100*
150
140
130
120
Global Economic Activity Index (IGAE)

110

Output Growth Picks Up in August
Mexico’s Global Economic Activity Index, the monthly proxy
for GDP, grew 0.4 percent in August after increasing 0.1
percent in July. The three-month moving average shows
steady growth since the end of 2013 (Chart 1). Servicerelated activities (including trade and transportation) increased 0.5 percent in August, while goods-producing industries (including manufacturing, construction and utilities)
grew 0.2 percent. Agricultural output expanded 6.6 percent.
Official estimates of third-quarter GDP will be released Nov.
21. Mexico GDP grew 1.9 percent (annualized) in the first
half of the year.

100
90
80
*Three-month moving average, seasonally adjusted.
SOURCE: Instituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography).

Chart 2
Oil Exports Plummet as Manufacturing Exports Stabilize
Index, January 2000 = 100*
350
Other 4%

Exports Grow in September

300

Exports grew 1 percent in September after dropping 6.4
percent in August. The three-month moving average of exports stabilized after declining for several months (Chart 2).
Oil exports improved in late spring due to a slight recovery
in oil prices; however, the trend was quickly reversed. Total
exports were down 3 percent and oil exports were off 45
percent in the first nine months of 2015 compared with the
same period a year ago. Manufacturing exports were up 2.3
percent year over year in September.
Industrial Production Expands in August
Mexico industrial production (IP) growth is recovering after
pausing earlier in the year. Total IP—which includes manufacturing, construction, oil and gas extraction, and utilities—
inched up 0.2 percent in August. Three-month moving averages show a turnaround in total IP (Chart 3). In addition,
manufacturing IP continues on an upward trend. Meanwhile,
U.S. IP fell 0.2 percent in September.
Retail Sales Increase in July
Retail sales rose 0.5 percent in July after growing 1.2 percent in June. The three-month moving average shows
strong growth over the first seven months of the year
(Chart 4). Year over year, retail sales are up 5 percent.
However, consumer confidence worsened in August and
September.
Federal Reserve Bank of Dallas

Oil exports
6%

Oil

250

200

Manufacturing
90%

Total

150

100

Manufacturing

50

*Three-month moving average, seasonally adjusted; real dollars.
SOURCE: Instituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography).

Job Growth Continues in 2015
Formal-sector employment—jobs with government benefits
and pensions—rose at an annualized rate of 3.7 percent in
September (Chart 5). Year to date, employment is up an
annualized 4.2 percent, which is about the same as the
2014 annual job growth rate.
Peso Holds Relatively Steady in October
The peso held steady against the dollar in October, when
the exchange rate averaged 16.6 pesos per dollar versus
16.9 in September (Chart 6). The peso has lost 19 percent

Mexico Economic Update

1

of its value against the dollar over the past 12 months. The
Mexican currency has been unstable, in part due to the expectation of an increase in U.S. interest rates and the impact
of falling oil prices on Mexico’s government finances. Oil revenues account for about a third of the federal government
budget.

Chart 3
Industrial Production Ticks Up
Index, January 2000 = 100*
130
125

Manufacturing IP

120

Total

Inflation Hits Another Historic Low

115
110
105

U.S. IP

100
95
90
*Three-month moving average, seasonally adjusted.
SOURCES: Instituto Nacional de Estadística y Geografía (National Institute of Statistics and
Geography); Federal Reserve Board.

Chart 4
Retail Sales Increase Since the Beginning of the Year

Inflation in September fell to 2.5 percent year over year
(Chart 7), logging its fifth straight month at a rate below the
central bank’s long-term inflation target of 3 percent. Consumer prices excluding food and energy rose 2.4 percent.
Banco de México has kept the policy rate at 3 percent since
June 2014 based on the belief that inflation expectations are
well-anchored. However, policymakers have noted their intent to raise interest rates as soon as the Federal Reserve
tightens U.S. monetary policy. Their objective is to prevent
further deterioration of the peso, which could push up inflation.
—Jesus Cañas
……………………………………………………………………………………

Index, January 2000 = 100*
160

About the Author

150

Cañas is a business economist in the Research Department
at the Federal Reserve Bank of Dallas.

140
130

Chart 6
Peso Regains Some Lost Ground

120

Peso/dollar average
18

110

17

100

16
15

90

14

*Three-month moving average, seasonally adjusted; real pesos.
SOURCE: Instituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography).

13
12

Chart 5
Job Growth Remains Robust

11

Percent*
10

10
9
8

5
SOURCE: Banco de México.

0

Chart 7
Inflation Continues Below Banco de México's Long-Term Target
Year/year percent change
12

-5

10

-10

8

-15
'07

'08

'09

'10

'11

'12

'13

*Month/month; seasonally adjusted, annualized rate.
SOURCE: Instituto Mexicano del Seguro Social (Mexican Social Security Institute).

'14

'15
6

4

2

Banco de México long-term target

0
SOURCE: Instituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography).
.

Federal Reserve Bank of Dallas

Mexico Economic Update

2