from the Dallas Fed

— this post authored by Jesus Canas and Benjamin Meier

Mexico’s consensus growth forecast for 2018 worsened slightly from 2.3 percent in July to 2.1 percent in August. The 2019 forecast held steady at 2.2 percent. In addition, second-quarter gross domestic product (GDP) growth was revised down further from -0.4 percent to -0.6 percent (quarter/quarter). A drop-off in public and private investment in the second quarter contributed to the weak output growth.

More recent data are mostly positive. Mexico’s monthly GDP proxy measure increased in July, as did industrial production and retail sales, and formal employment continued to expand in August at an above-average pace. On the other hand, exports were flat in July and inflation increased for the fourth month in a row. The peso strengthened some against the dollar in August.

Monthly Economic Activity Index Up in July

Mexico’s global economic activity index, the monthly proxy for GDP, grew 0.4 percent in July after falling 0.1 percent in June. On a year-over-year basis, the activity index jumped 2.8 percent (Chart 1). Service-related activities (including trade and transportation) increased 0.3 percent in July over June. Goods-producing industries (including manufacturing, construction and utilities) ticked up 0.2 percent, and agricultural output grew 2.6 percent.

Exports Flat in July but Up Year to Date

Total exports were flat in July after falling 1.3 percent in June. Oil exports declined 3.2 percent, while manufactured-goods exports ticked up 0.2 percent. As a result, three-month moving averages of oil, manufacturing and total exports have fallen for three months in a row (Chart 2). Detailed data on export destinations suggest the recent slowing is in non-U.S. exports. Nevertheless, total exports year to date are up 8.1 percent, with manufacturing exports up 6.2 percent and oil exports up 38 percent, compared with the same period last year. The rise in oil exports in 2017 and early 2018 stems largely from higher oil prices, not an increase in the volume of exports.