Full text of Mexico Economic Update : October 2012
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Mexico Economic Update October 2012 Summary Mexico’s economy appears to have slowed slightly in recent months. The Global Economic Activity Index (IGAE) suggests growth slowed in July, and retail sales fell. Exports and industrial production declined in August. Employment grew in September, and the peso continued appreciating. Inflation remains well above target. Global Economic Activity Index The pace of economic growth moderated in July as IGAE, a monthly proxy for Mexico gross domestic product, grew 0.7 percent, down from 0.9 percent in June. Service-related activities (including trade, transportation, services and government) expanded 0.4 percent. Goods-producing industries, including manufacturing, construction, utilities and mining, grew 0.5 percent. (A monthly proxy for Mexico gross domestic product) Index, January 2000 = 100 140 130 120 110 100 90 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Exports fell 0.9 percent in August after growing 1.4 percent in July. Oil exports grew 29.8 percent, while manufacturing exports dropped 8.3 percent in August. Total exports increased by just 4.4 percent during the first eight months of the year, a substantially slower pace than the 16.9 percent growth seen over the same period in 2011. Oil exports have fallen 6.2 percent, and manufacturing exports have grown 5.8 percent during the first eight months of the year. Mexico Exports Index, January 2000 = 100 350 Oil 300 Total 250 Manufacturing 200 150 100 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mexico Industrial Production Index, January 2000 = 100 125 120 Total Manufacturing 115 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) fell 0.7 percent month over month in August after growing 0.5 percent in July. U.S. IP fell 1.4 percent in August and grew 0.6 percent in 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 Index, January 2000 = 100 150 Retail sales contracted 1.4 percent in July after growing 1.8 percent in June. Year over year, retail sales grew 3 percent. Consumer confidence fell 1.5 percent in September after falling 0.9 percent in August. 140 130 120 110 100 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mexico Formal Employment Formal employment—jobs with government protections and pensions— expanded at an annualized rate of 4 percent in September (month over month) after growing 4.1 percent in August. Employment grew at a 4.8 percent quarter-overquarter annualized rate in the third quarter, up from 4.6 percent growth during the second quarter, but still down from 5.3 percent growth during the first three months of the year. Since December, Mexico has added over 547,000 formal-sector jobs. Annual growth rate (percent) 10 5 0 -5 -10 -15 2007 2008 2009 2010 2011 2012 Peso/Dollar Exchange Rate Peso/dollar average 16 15 14 13 12 11 Sept: 13.0 10 The peso has strengthened 7.7 percent against the dollar since the end of June. The exchange rate averaged 13 pesos per dollar during September, down from an average of 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. 9 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mexico Consumer Price Index Inflation increased in September for the fifth consecutive month. Prices rose 4.8 percent year over year, the fastest pace in 30 months. Agricultural product prices, which rose 16.1 percent in September due to a severe drought and bird flu outbreak that impacted egg prices, underlie the recent spike in inflation. 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. Exports and retail sales are in real terms. SOURCES: IGAE, 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 one to two weeks preceding regularly scheduled Federal Open Market Committee meetings.