from the Dallas Fed

— this post authored by Jesus Canas and Alexander T. Abraham

Mexico’s economic output recovered sharply in the fourth quarter, rising 4.1 percent after falling in the third quarter as a result of the September earthquakes. Mexico’s gross domestic product (GDP) grew 1.6 percent in 2017 (four-quarter change), below last year’s forecast and the slowest annual growth in four years. The consensus GDP growth forecast for 2018 calls for a slight acceleration in activity to 2.2 percent (annual average growth).

Despite robust GDP growth in the fourth quarter, other recent data are mixed. Exports and employment posted positive growth, but industrial production and retail sales fell. Inflation ticked up, but the peso recovered some ground against the dollar in January.

Fourth-Quarter Output Surges

Mexico GDP expanded at a 4.1 percent annualized rate in the fourth quarter (Chart 1). Goods-producing industries (manufacturing, construction, utilities and mining) ticked up 0.4 percent. Service-related activities (wholesale and retail trade, transportation and business services) gained 4.9 percent. Agricultural output spiked 13 percent.

Export Growth Continues in December After Strong November

Total exports increased 0.5 percent in December after jumping 5.6 percent in November. December manufactured goods exports fell 1.2 percent, while oil exports surged 22.4 percent. All three-month moving averages increased (Chart 2). In 2017, total exports grew 7.5 percent, manufacturing exports rose 6.4 percent and oil exports climbed 23.8 percent. The rise in oil exports last year stemmed largely from higher oil prices, not increased volume of exports.

In November, Industrial Production Ticks Down, Manufacturing Rebounds

Mexico’s industrial production (IP), which includes manufacturing, construction, oil and gas extraction, and utilities, ticked down 0.1 percent in November. Manufacturing IP, however, rose 0.6 percent after falling the previous two months. The three-month moving average dropped for both IP measures (Chart 3). In the U.S., IP rose 0.9 percent in December after slipping 0.1 percent in November.