Research Dept. News
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Monthly Report, num 310 - February 2008
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International review - Mexico
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Mexico: recovery continues with less inflation
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Mexico grows by 3.7% while consumption and investment remain strong but foreign sector dropping.
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Mexico’s economy continued to move ahead with growth of 3.7% year-on-year in the third quarter. Private consumption confirmed its recovery with increases of 5.0% while private investment lost some drive but managed to maintain level with a rise of 6.0% year-on-year. The public sector continued to recover from the stagnation at the beginning of the year with a very small advance. Nevertheless, it is in the foreign sector where the main doubts lie given that, while exports sharpened their drive with a rise of 7.4%, these again went lower than imports which were up 9.8%.
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Among the more recent indicators of economic activity, things also have improved in recent months. Industrial production slowed in November with weak growth of 0.8% year-on-year and looks like ending a year in which sluggishness has been the dominant note. Manufacturing was somewhat better with an increase of 2.2% while construction (reflecting the dominant situation of its neighbour to the North) rose by a modest 0.3%.
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Industry remains weak but inflation goes below 4% and labour costs moderate.
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Inflation remains stable. Prices rose by 3.8% year-on-year in December and the core index (the general index less energy and food) rose by 4.0%. The increase in unit labour costs in the second quarter was less than in the third quarter with an increase which dropped from 6.7% to 2.4% year-on-year which eases losses in competitiveness. In turn, the official unemployment rate dropped to a harmless 3.4% of the labour force.
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Foreign sector continues to worsen.
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The worsening of the trade balance took a breather but prospects continued to be downward. The cumulative trade deficit for the last 12 months ending in November was down slightly to 11.2 billion dollars. This was an improvement due to oil exports given that, without this precarious cushion, the trade deficit for that period hit 52.6 billion dollars, an increase of 15.6% year-on-year.
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