Mexico: Uncertainty chips away at domestic demand and overall growth in Q1
Expenditure-based national accounts released by the Statistical Institute (INEGI) on 21 June confirmed tepid first-quarter growth. Output grew 1.2% year-on-year in the first quarter, down markedly from 1.7% in the fourth quarter of last year, owing to lackluster consumption gains and blunted export growth.
Household spending slowed to 1.1% year-on-year (Q4 2018: +1.4% year-on-year) amid higher unemployment and fuel shortages, as well as on a series of one-offs. Government spending fell 0.8% (Q4 2018: +0.3% yoy) in light of the so-called political business cycle; public-sector outlays tend to dry up whenever a new government takes the reins. Fixed investment, meanwhile, appeared unable to shake off Andrés Manuel López Obrador’s nascent presidency and Mexico’s uneasy trading relationship with the United States (Q1: -0.9% yoy; Q4 2018: -2.2% yoy).
Foreign trade, meanwhile, was hit by the downturn in manufacturing. Export growth almost halved to 2.0% year-on-year (Q4 2018: +3.9% yoy) on ebbing demand north of the Rio Grande. By the same token, import growth plunged (Q1: +1.7% yoy; Q4 2018: +5.6% yoy). Taken together, net exports contributed marginally to growth in the first quarter—contrasting the fourth quarter of last year.