Service sector activity in the country was hit during the summer by a resurgence in the coronavirus pandemic, while global supply chain disruptions have dented the manufacturing sector, especially in key sectors such as carmaking.
see photosThe main hit came in the second quarter of 2020
Mexico’s economy shrank 0.2 percent in the third quarter from the previous three-month period, beginning a decline in the first quarter after recovery from the pandemic, preliminary data from the national statistics agency INEGI showed on Friday.
Service sector activity in the country was hit during the summer by a resurgence in the coronavirus pandemic, while global supply chain disruptions have dented the manufacturing sector, especially in key sectors such as carmaking.
A seasonally-adjusted contraction in gross domestic product (GDP) in the July-September period compared the consensus forecast in a Reuters poll for a 0.1% increase, and followed surprisingly weak data for August.
Nikhil Sanghani, an analyst at Capital Economics, said the latest figures left GDP at 2.3% below pre-pandemic levels, though he suggested the August figures could be revised and said the economy was “correct” in October. going in that direction”.
“But the bigger picture is that there will still be a struggle to recover from here,” Sanghani said in a research note.
“Global component shortages will keep auto production down for the foreseeable future, a slowdown in the US will constrain external demand, and a lack of policy support will keep domestic demand low,” the note said.
Secondary activities, which include manufacturing, grew by 0.7%
The economy’s sluggish performance risks posing a dilemma for Mexico’s central bank, which has launched a series of rate hikes as inflation rose well above its 3% target. However, its board is divided over the rate hike.
A breakdown of GDP data shows the contraction was driven by weakness in the tertiary sector, which covers services, and which declined 0.6% compared to the second quarter.
Secondary activities, which include manufacturing, grew by 0.7%, while primary activities such as farming, fishing and mining also grew by 0.7%, the data showed.
The dent to growth is a blow to Mexico, which suffered an economic contraction of 8.5% last year during the pandemic, the sharpest recession since the Great Depression of the 1930s.
The main hit came in the second quarter of 2020. Since then, Mexico has posted four consecutive quarters of growth, including a 1.5% increase during the April-June period.
Mexico’s finance ministry said it stuck to its forecast of 6.3% growth this year, despite the economy’s third-quarter performance.
Compared to the same quarter a year ago, Mexico’s economy grew by 4.6 percent, INEGI said.
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Final third-quarter GDP figures for Latin America’s second-largest economy are due to be published on November 25.
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