Economics: Consumption and Credit Sustain Growth
According to the National Statistics Office’s preliminary estimate of GDP for the first quarter of 2016, the Mexican economy grew 2.7% between January and March compared to the same quarter a year earlier. The report was in line with GEA’s estimate of 2.6%.
Preliminary GDP growth was driven primarily by the service sector, which during the first quarter of 2016 expanded 3.7% year over year; this marks the second consecutive quarter in which services have achieved their strongest rate of growth since the first quarter of 2013.
The service sector’s continuing momentum is directly related to the ongoing rise in private consumption, which grew at 12-month rates of better than 3.0% each month between December 2015 and February 2016. At the same time, consumer, housing and business credit have been growing at among their quickest rates of the past two years.
In its latest monetary policy statement, Banco de México said last week that the expansion of the Mexican economy during the first quarter of the year was sustained by the strength of private consumption even as external demand weakened, as did gross fixed investment.
In that statement, the monetary authority said it was leaving its target overnight lending rate at 3.75% as the balance of risks to growth is unchanged from the previous policy review, conducted a month earlier.
Evidence of those factors was made public last week in the form of reports on private consumption and fixed investment. An especially strong report on private consumption reveled a 5.1% expansion of such spending in February, a considerable improvement over the 2.8% increase reported for the same month of 2015.
Consumers displayed renewed enthusiasm for imported goods as purchases of such items increased at a 12-month rate of 12.5%. At the same time, consumption of domestically generated services (+4.7%) and goods of local origin (4.0%) remained strong.
Accumulated results for January-February 2016 show that consumption widened 4.3%, up from 3.2% in the same period of 2015.
At the same time, gross fixed investment grew a relatively robust 5.2% in February compared to the same month a year earlier, but when combined with much weaker results from January, the average rate of expansion in GFI year to date is a lackluster 2.5% as opposed to the 4.9% increase reported for the same two-month period of 2015.
Mexico’s leading indicator for March slipped 0.03 points compared to the previous month, thereby marking the 18th consecutive month of weaker results.
The main factor accounting for the downside in the March index was slippage in the business confidence index’s component as to whether this might be a good time to invest, which moved 0.03 points lower for the month.
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