Mexican economy likely to have recorded slight sub-trend growth in Q3

Mexican economy is expected to have recorded slightly sub-trend growth in the third quarter. Meanwhile, the economic outlook of the country is worsening.

“IP, economic activity and trade numbers through August and our expectations for them in September pegs 3Q GDP growth at 1.9 percent yoy as against 2.0 percent in 2Q”, said Societe Generale in a research note.

The Mexican economy continued to slowdown in spite of a considerable sequential rebound of 1.1 percent in the third quarter after the contraction in second quarter. Industrial production stayed almost flat in the September quarter in spite of certain improvement in manufacturing as the rate of mining contraction accelerated and the construction sector began shrinking again.

On the demand front, the deceleration of growth is expected to have been driven by struggling investment growth. With the medium-term trade outlook worsening after the results of U.S. inflation, investment growth is unlikely to expand strongly in the remainder of this cyclical expansion, noted Societe Generale.

Furthermore, consumer confidence has worsened whereas purchasing power is also expected to be impacted on the prospect of increase in inflation in the midst of weakening peso. Thus, even if stronger fiscal spending in the U.S. could assist in the Mexican economy to grow again to certain degree, the medium-to-longer-term outlook would worsen unless the U.S.  trade policy uncertainty recedes, added Societe Generale.