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Mexico’s First-Quarter Output Revised Up, but Growth Stalls in April
June 29, 2018
Mexico’s economy grew slightly faster in first quarter
2018 than previously estimated. First-quarter gross
domestic product (GDP) was revised to 4.6 percent,
up from the prior estimate of 4.5 percent. April’s
monthly GDP measure declined. Nevertheless, the
consensus 2018 GDP growth forecast has been revised
higher to 2.3 percent in May from 2.2 percent in April.
More recent data are mixed. Exports and industrial
production fell, while retail sales and employment continued growing. Inflation declined, but the peso weakened slightly against the dollar in May.
Monthly Economic Activity Index Falls in April
Mexico’s global economic activity index, the monthly
proxy for GDP, fell 0.6 percent in April after growing
0.2 percent in March. However, the measure’s threemonth moving average continues on an upward trend
(Chart 1). Service-related activities (including trade
and transportation) slipped 0.5 percent in April. Goods
-producing industries (including manufacturing, construction and utilities) declined 0.4 percent, and agricultural output dropped 1.7 percent.
Exports Fall in April but Are Up Year to Date
Total exports fell 2.5 percent in April after rising 2.6
percent in March. Manufactured-goods exports declined 3.1 percent, while oil exports increased 4.4 percent. Three-month moving averages of total and manufacturing exports still show consistent growth since
late 2017, although oil exports flattened in early 2018
(Chart 2). Year to date through April, total exports
have increased 9.6 percent, with manufacturing exports up 7.6 percent and oil exports up 35.8 percent.
Industrial Production Ticks Down in April
Mexico’s industrial production (IP), which includes
manufacturing, construction, oil and gas extraction,
and utilities, fell 0.4 percent in April over the prior
month after slipping 0.2 percent in March. Manufacturing IP dropped 2.2 percent in April after growing
2.3 percent in March. The moving average rose for
manufacturing IP despite April’s slowdown (Chart 3).
U.S. IP fell 0.1 percent in May after growing 0.9 percent in April.

Federal Reserve Bank of Dallas

Retail Sales Surge
Retail sales grew 0.9 percent in March over the prior
month after rising 1.7 percent in February. The moving
average shows a sharp turnaround from the depressed
levels observed during the second half of 2017 (Chart
4). Year over year in March, retail sales were up 3.4
percent. Sales were suppressed in 2017 by high inflation (which pushed prices higher relative to wages),

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elevated interest rates that raised the cost of credit,
and depressed consumer confidence.
Rapid Job Growth Continues
Formal sector employment—jobs with government
benefits and pensions—grew at an annualized rate of
4.6 percent in May over April and is up 4.5 percent
year to date (annualized) (Chart 5). Employment
growth was 4.3 percent in 2017 (December/
December); it has averaged 3.1 percent per year since
2007. The unemployment rate in May was 3.2 percent,
about the same as a year earlier. Strong job growth
and low unemployment point to tightening labor markets.
Peso Loses Ground in May
The Mexican currency averaged 19.6 pesos per dollar
in May, a 6.1 percent depreciation from April (Chart 6).
Nevertheless, the peso is still up 9.2 percent since January 2017, when the exchange rate reached a low of
21.4 pesos per dollar. The Mexican currency has been
under pressure recently as a result of increased uncertainty regarding U.S. trade policy and Mexico’s July 1
presidential election.
Foreign-Owned Government Debt Share Ticks
Down
The share of peso-denominated government debt held
abroad fell slightly in April to 32 percent. The share
declined in 2017 after moving higher early in the year.
The moving average reflects the continuing downward
trend (Chart 7). The extent of nonresident holdings of
government debt is an indicator of Mexico’s exposure
to international investors, whose holdings could quickly
reverse if they perceive a change in market sentiment.
Inflation Continues Cooling
The 12-month change in the consumer price index
(CPI) was 4.5 percent in May, about the same as in
April (Chart 8). Inflation is moving closer to Banco de
México’s target of 3 percent. CPI core inflation
(excluding food and energy) rose 3.7 percent over the
12 months ending in May. Nevertheless, Mexico’s central bank raised its benchmark interest rate by 25 basis
points to 7.75 percent on June 18. U.S. interest rates,
global trade tensions and July’s presidential election
have increased the peso’s volatility, posing a risk to
inflation.
—Jesus Cañas and Alexander T. Abraham
……………………………………………………………………………………….
About the Author
Cañas is a senior business economist, and Abraham is
an economic programmer in the Research Department
at the Federal Reserve Bank of Dallas.

Federal Reserve Bank of Dallas

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