|
Economy
gathers speed in second quarter
A more
complete data set for national accounts confirmed the 3.9% annual second
quarter growth reported last month. The reading represents a slight
improvement compared to the 3.7% growth registered in the first quarter
and confirms that the economy bottomed out in the second quarter of 2003,
when economic activity was virtually unchanged over the same period in the
prior year.
Higher
exports, investment and consumption spur growth in second quarter
Increased
export growth and a pickup in domestic demand drove the improvement in the
second quarter compared to the preceding quarter. However, a
reduction in inventories mitigated the positive developments in the
domestic economy. Total consumption growth added a full percentage
point from 3.2% in the first quarter to 4.2% in the second. The
improvement was entirely due to a pickup in private consumption, which
accelerated from 3.7% growth in the first quarter to 5.4% in the second.
Government consumption, in contrast, deteriorated further from a 0.3%
contraction in the first quarter to a 5.0% decline in the second, despite
increased government spending power in the wake of higher oil revenues.
Gross fixed investment grew at a resilient 5.8%, which was even above the
robust 4.5% registered in the preceding quarter. Thus, investment
growth experienced the fastest expansion observed since 2000.
Quarter-on-quarter data corroborate the acceleration observed in the
annual figures. According to seasonally adjusted data, gross fixed
investment added 1.85% over the preceding quarter, which is equivalent to
an annual growth rate in the double-digit range. The external sector
also developed positive in the second quarter. Exports of goods and
services grew at the fastest pace in more than three years (Q2: +14.4%
year-on-year; Q1: +10.4% yoy). Import growth also picked up since
the Mexican export industry depends largely on imported intermediate goods
as inputs.
Economy
disappoints in July but upward trend remains intact
In July,
economic activity increased 3.0% over the same month last year, according
to the global indicator for economic activity (IGAE, Indicador Global de
la Actividad Económica). The actual reading was below expectations,
which had the economy growing at an annual 3.9% pace and was also below
the 5.2% annual growth rate recorded in June. A month-on-month
comparison, confirms the weaker reading. According to seasonally
adjusted data, the economy contracted 0.21% over the preceding month,
following on a 0.48% monthly expansion in June. However, the bout of
weakness does not necessarily indicate that the recovery of the economy is
over before it has begun. In part, the weak July reading is due to a
slump in agriculture, where activity dropped 6.4% over August last year,
following on 7.6% annual growth in June. The agricultural sector
frequently exhibits erratic growth movements and could easily bounce back
in the coming month and thus compensate for the bout of weakness observed
in July. Services and industry also slowed over June, albeit on a
lesser scale. Industrial output growth dropped from 5.2% in June to
3.8%, while services slowed from a 5.1% expansion in June to a 3.8% pace
in July. Nevertheless, the upward trend in the overall economy
remains intact. In July, the annual average growth rate inched
upwards a notch from 2.7% in June to 2.8% - the ninth consecutive increase.
Unemployment
jumps to seven-year high, as economic recovery attracts new job seekers
While recent
indicators paint an ambiguous picture of the economy, the overall balance
is tipped on the positive side. In August, unemployment rose to 4.4%
from 3.8% in July. The August figure was well above market
expectations, which had anticipated unemployment to remain unchanged at
3.8%. However, instead, unemployment surged to its highest rate
observed since January 1997, when the economy was emerging from the
after-effects of the Peso crisis. The reason for the increase in the
open unemployment rate was a sudden jump in the rate of participation, as
improved economic developments observed in the past months prompted many
inactive people to start looking for jobs.
Leading
indicators and consumer confidence augur well for continued recovery
Consumer
confidence and leading indicators, on the other hand, augur an improvement
of the economy. The leading and coincident indicators for July,
published on 6 October, support recent optimism. The coincident
indicator that tracks the current developments in the economy was up 0.71%
over the preceding month in seasonally adjusted terms, following on a
0.26% decline in June. The leading indicator that tries to
anticipate future developments in the economy, increased 0.79% over the
preceding month. In addition, consumer confidence, which had dropped
for three consecutive months up to August, recovered by 1.3 percentage
points in September to reach 96.8 points, as all but one of the five
sub-categories that comprise the overall index of consumer confidence
improved over the previous month. Only the current economic state of
the households was seen more negatively (-2.1 percentage points
month-on-month) but households were optimistic about their future economic
state (+3.6 percentage points over the preceding month). |
