Full text of Mexico Economic Update : September 2011

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Mexico

Economic Update

September 2011
Summary

Mexico GDP grew 1.1 percent quarter over quarter in the second quarter, up from 0.6 percent in the first quarter.
However, recent monthly data suggest there is slowing under way; industrial production dipped in June, July exports fell, and employment growth continued to slow from its rapid first-quarter pace. Retail sales ticked up in
June. The peso slightly appreciated relative to the dollar in July, and inflation fell slightly. The 2011 GDP forecast
for year-over-year growth was revised down.
Mexico GDP

Percent annual growth rate

15.0
10.0
5.0

0.0
-5.0

2007

2008

2009

2010

2011

-10.0
-15.0

-20.0

Second quarter 2011 GDP growth came in
at 1.1 percent quarter over quarter (4.5
percent growth at an annualized rate).
Manufacturing, construction, utilities and
mining grew 1.3 percent, followed by
trade, transportation, services and government, which grew 1 percent from the previous quarter. Agriculture-related activities fell 2.6 percent. The GDP growth forecast for 2011 has been revised down to
3.8 percent.

-25.0
-30.0

Exports fell 0.6 percent month over
month in July and oil exports dropped
for the fourth month in a row, falling
12.8 percent. Manufacturing exports
grew 3.5 percent in July. Year-to-date,
exports have grown 18.1 percent, a
substantially slower pace than the 33
percent growth during the same period
last year. Oil and manufacturing exports have grown 38 percent and 14.6
percent, respectively.

Mexico Exports

Index, January 2000 = 100

350
Oil

300

Total
250

Manufacturing

200
150

100
50
2000

2002

2008

2010

Industrial production (IP) fell 0.6
percent month over month in June
after growing 0.9 percent in May.
Mexico IP contracted despite
growth in U.S. IP in July. Mexico’s
industrial production typically
tracks U.S. industrial production
due in part to the large presence
of the U.S. automotive industry in
Mexico.

120
Total

115
Manufacturing

U.S. industrial
production

105
100

95
90
2000

2006

Mexico Industrial Production

Index, January 2000 = 100

110

2004

2002

2004

2006

2008

2010

Mexico Retail Sales

Index, January 2000 = 100

140

Retail sales grew at 0.7 percent in June
over May after being largely flat year-todate. However, domestic consumption
may not be in for a sustained recovery.
Consumer confidence fell 1.3 percent
month-over-month in August. Domestic
consumption has been an important part
of Mexico’s recovery since the crisis.

135
130

125
120

115
110
105

100
95

90
2000

2002

2004

Formal sector employment grew at
an annualized month-over-month
rate of 3.4 percent in August.
Employment grew 3.8 percent in
the second quarter (annualized
rate), down from 4.8 percent
growth during the first three
months of the year. Since December, Mexico has added over
310,000 jobs and formal-sector
average wages neared prerecession levels.

2006

2008

2010

Mexico Formal Employment

Percent annual growth rate

10

8
6
4
2

0
-2
-4
-6

-8
-10
-12

2007

2008

2009

2010

2011

Peso/Dollar Exchange Rate

Average peso/US$

16
15
14
13
12
11

July: 11.7

The peso has strengthened against the
dollar this year. The peso/dollar exchange rate averaged 11.7 pesos per dollar during July, up from an average of
11.8 in June. The peso has appreciated
6.1 percent against the dollar since
December; however, it is still down from
2008 levels.

10
9
8
2000

2002

2004

2006

Prices rose 3.4 percent year over year in
August, down from 3.6 percent in July. The
reading was mainly the result of higher
prices for eggs, oranges, sugar and beans.
Following its latest policy meeting on August 26, Banco de México continued to note
the lack of broad-based price pressures and
kept the benchmark interest rate at 4.5 percent; however, the central bank pointed out
that the pace of expansion of domestic activity had lost dynamism and implicitly
stated the possibility of a rate cut in the
future.

2008

2010

Mexico Consumer Price Index
Year-over-year percent change

12
10
8

6
4
2
Long-term target

0
2000

2002

2004

2006

2008

2010

NOTE: All data are seasonally adjusted except exchange rate. GDP, exports and retail sales are in real terms.
SOURCES: Gross domestic product, industrial production and retail sales: Instituto Nacional de Estadística y Geografía (INEGI); exports, exchange rate and
consumer price index: 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 the week preceding regularly scheduled FOMC
meetings.