Mexican Economy Grows in the First Quarter of 2018

Mexico’s pickup on industrial output and continuous growth of its services and agricultural sector helped the country’s economy to grow.

In the first quarter of 2018, the economy grew 1.3 percent, INEGI, the country’s statistics bureau, announced on Thursday.

INEGI said that the Gross Domestic Product (GDP) expanded a seasonally adjusted 1.1 percent from the last quarter of 2017. The increase is equivalent to an annualized rate of 4.6 percent, the biggest since the third quarter of 2016.

The services sector, rising 1.1 percent from the previous quarter, was the biggest contributor to the country’s GDP. Increased employment and a slowdown in inflation supported the growth of the sector.

Meanwhile, Mexico’s agricultural sector grew 5.4 percent, and agricultural production rose 0.9 percent.

Industrial production grew 0.9 percent from the last quarter of the previous year, the highest in more than two years. Gains in manufacturing and a rebound in construction contributed to the growth. Oil and gas production, on the other hand, fell 0.9 percent.

After slowing sharply to 2 percent in 2017, the country’s economy is expected to grow around 2.3 percent this year, according to central bank’s most recent survey of economists.

The GDP is a measure of overall output of the country’s good and services.

Economic Indicators

aerial view of Mexico City

Mexico’s economy has been stable amid ongoing negotiations with the US and Canada to rewrite the North American Free Trade Agreement (NAFTA), and the possible economic policy change after Mexican elections happening in July.

Alberto Ramos, Goldman Sachs Latin America economist said that the uncertainty could affect both producers and consumers; the two may get more defensive in their investment and spending decisions in the next quarters.

“We expect the engines of growth to rebalance — with higher contributions from manufacturing and net exports and less thrust from services and private consumption,” he said in a report.

Meanwhile, Mexico’s high interest rates have likely held back some investments, said Bill Adams, senior economist at PNC Financial Services Group, “Mexico could find room to lower borrowing costs after the elections; it may be constrained by further peso weakness or higher U.S. interest rates.”

He added that the slowdown of North America’s automotive sectors also poses a risk for Mexico’s industrial production. The sector has a huge role in overall manufacturing,

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