Economics: Signs of an Economy Stalling
At the beginning of the month some observers were slightly relieved to hear that the preliminary reading of second quarter GDP showed some growth on a seasonally adjusted basis compared both to the first quarter of 2019 and the April through June period of 2018. But at month’s end Inegi released its first formal reading of GDP for the quarter which revealed an 0.8% decline year on year based on original series data, the sharpest such contraction since the country’s deep 2009 recession.
The tertiary sector managed to sustain its role as the main driver but the pace of service growth has been slowing to its lowest levels in almost a decade with some of the slowest levels seen in nine and a half years at the same time as industrial activity continued to fall.
Other more decidedly negative indicators last month included those related to aggregate demand components such as an almost seven point drop in gross fixed investment in May at the same time as private consumption growth was only marginal. While the jobless rate had been leveling off in recent months at July it was three basis points above levels of a year earlier while underemployment came in seven notches higher. Meanwhile, the national income and spending survey (ENIGH) showed household income falling significantly during 2018.
As for the labor market, the restrained growth trend of recent months in the base rate of unemployment plateaued in July 2019 as it remained at June levels of 3.6% of the economically active population, three notches above the 3.3% level recorded for the same month a year prior.
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