Mexico Q2 growth weaker than initial estimate, slowdown foreseen

MEXICO CITY (Reuters) – Mexico’s economy grew 0.8% in the second quarter from the previous three-month period, national statistics agency INEGI said on Tuesday, slightly below its preliminary estimate and prompting analysts to warn of a slowdown.

INEGI last month estimated that gross domestic product (GDP) increased by 0.9% in the April to June period. Analysts polled by Refinitiv expected the final figures would show the economy expanding by 1.0% over the quarter.

A breakdown of the GDP figures showed the important tertiary or services sector grew 0.7%, below the 1% initially estimated.

Primary activities such as farming, fishing and mining increased 0.7% quarter-on-quarter, undershooting the preliminary data by a tenth of a percentage point.

Secondary activities, which cover manufacturing, grew by 1.2%, beating the preliminary estimate of 0.8%, and pointing to buoyant construction demand.

Pantheon Macroeconomics said the quarter overall contributed to a “solid” first half of the year, with the first quarter having recorded a downwardly revised gain of 0.8%. Yet it warned that a drop in momentum was likely.

“Robust fundamentals, including a resilient labor market and falling inflation, are offsetting the drag from tighter financial conditions,” Andres Abadia, the chief Latin America economist at Pantheon, said in a note.

However, he added that “tighter financial conditions and the weakness of key sectors … are now a clear drag,” pointing also to the impact of “global conditions” and interest rates.

The Mexican central bank held interest rates steady again this month for a third time, with cuts not forecast by most analysts until later this year.

The Mexican economy grew 3.6% in the second quarter on an annual basis, slightly below the preliminary estimate of 3.7%.

(Reporting by Mexico City newsroom; Writing by Isabel Woodford; Editing by Paul Simao and Grant McCool)