Mexico’s real GDP likely grew in Q4 and FY2015 on stronger consumption growth

Mexico's supply-side data releases imply that the Mexican economy expanded 2.5% in Q4 2015 and FY2015. The nominal GDP is expected to have grown 5.1% y/y in Q4 and 5.1% in the entire 2015. Meanwhile, as the real GDP is likely to have accelerated moderately in 2015, nominal growth slowed down considerably from 2014's 7%.

Hence, it is expected that the real GDP grew mainly due to the drop in prices, stronger consumption growth. However, as inflation is likely to come back to normal levels in 2016, growth projections are expected to come under stress.

Meanwhile, the demand-side data of the GDP will be released in this week. In spite of a recent cut to growth outlook, the Mexican economy is still in a healthy state on a relative basis, assuming its export growth to the US continues to be on course. In recent quarters, service sector has contributed strongly. If the industrial production rebounds from the recent slowdown, the Mexican economy is likely to continue on trend in 2017.

The demand-side economy, led by consumption growth, unexpectedly looks to be stronger than the headline growth numbers show. However, the near-term outlook greatly depends on the export data that is being impacted by the lower oil prices. The Mexican economy might slow down further if the US economic growth slows. However, over the medium-term, the economic outlook continues to be positive.