Full text of Mexico Economic Update : November 2012

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Mexico Economic Indicators

DALLASFED

FEDERAL RESERVE BANK OF DALLAS • NOVEMBER 2012

Summary

 Mexico’s economy decelerated in the third quarter, growing just 1.8 percent quarter over quarter. Weaker
growth is likely driven primarily by external factors, reflected in declining exports and sluggish industrial production. In contrast, employment and retail sales continue to grow at a moderate pace. Inflation remains above target but has fallen over
the last two months. The peso, after appreciating steadily against the dollar for four months, depreciated slightly in November

Mexico GDP

The pace of economic growth moderated in the
XX
third quarter as gross domestic product only grew 1.8
percent quarter over quarter (annualized rate), down
from 3.3 percent in the second quarter and 5.4 percent
in the first quarter. In the third quarter, goods-producing industries, including manufacturing, construction,
utilities and mining, expanded at a 2.9 percent rate.
Service-related activities (including trade, transportation, services and government) grew 3 percent from
the previous quarter. Agricultural output fell –2.2
percent.

Annual growth rate (percent)

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

2007

2008

2009

2010

2011

2012

Mexico Exports
Index, January 2000 = 100

350
300

Oil
Total
Manufacturing

250
200
150

Exports fell again in October, down 0.2 percent after
XX
falling 1 percent in September. Exports have been
trending down steadily this year, suppressed by falling
oil exports. Oil exports are down 5 percent in the first
10 months of the year over the same period in 2011,
while manufacturing exports have grown 5.6 percent.
Total exports increased by just 4.1 percent during the
January–October period, a substantially slower pace
than the 15.3 percent growth seen a year ago.

100
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mexico Industrial Production
Index, January 2000 = 100

125
120
115

Total
Manufacturing
U.S. industrial production

110
105
100
95
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Industrial production (IP) bounced back in SepXX
tember, increasing 0.8 percent month over month
after falling 0.7 percent in August. Weaker growth in
Mexico IP follows on the heels of sharply lower U.S. IP
since July. Mexico’s IP typically tracks U.S. IP, due in
part to the U.S. automotive industry’s large presence
in Mexico. However, since the end of the recession,
Mexican IP has grown much faster than U.S. IP, which
has yet to reach its prerecession peak.

Mexico Retail Sales

Retail sales advanced 1 percent in September after
XX
growing another 1 percent in August. Year over year,
retail sales grew 4.5 percent. Consumer confidence
grew 2.9 percent in October after falling 1.9 percent in
September.

Index, January 2000 = 100

150
140
130
120
110
100
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mexico Employment

Formal employment—jobs with government protecXX
tions and pensions— expanded at an annualized rate
of 4.9 percent in October (month over month) after
growing 4.1 percent in September. On a quarterly basis, employment grew 4.8 percent in the third quarter,
similar to its pace in the first half of the year. Year to
date, Mexico has added over 610,000 formal-sector
jobs

Annual growth rate (percent)

10
5
0
-5
-10
-15

2007

2008

2009

2010

2011

2012

Peso/Dollar Exchange Rate

After steadily strengthening against the dollar since
XX
June, the peso began to fall again in November. The
exchange rate averaged 13.1 pesos per dollar during
November, up from 12.9 in October, but still down
from 13.9 in June. The peso-dollar exchange rate
continues to be driven by external events such as the
European debt crisis and the possibility of another
global economic slowdown.

Peso/dollar average

16
15
14
13
12
11
10
9
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2011

2012

Mexico Consumer Price Index

Inflation is still running above the central bank’s tarXX
get, but fell to 4.6 percent in October after five consecutive months of increases. Without food and energy,
prices increased 3.6 percent. Despite the resurgent
price pressures, Banco de México continues to hold
the benchmark interest rate at 4.5 percent where it has
been since July 2009.

Year-over-year percent change

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 Indicators is released the two weeks preceding regularly scheduled Federal Open Market Committee
meetings.