Mexico’s Economy Suffered Slight Recession in First Half

(Bloomberg) --

Mexico suffered a slight recession in the first half of the year, revised data showed, painting an even bleaker picture of a stagnant economy.

The nation’s $1.2 trillion economy shrank 0.1% on a seasonally adjusted basis every quarter from the end of last year through the first half of 2019, according to data released by the national statistics institute on Monday. Previous figures had showed a flat economy in the second quarter of this year and a 0.1% expansion at the end of 2018. A technical recession is defined by two consecutive quarterly contractions.

Analysts forecast Mexico’s gross domestic product to grow just 0.2% this year, the least since 2009, amid low oil output, slumping construction and stalled services activity. President Andres Manuel Lopez Obrador had repeatedly denied that the nation was in recession and said that defining the economy’s success by GDP growth is an outdated neoliberal concept that doesn’t take into account happiness and well-being.

Monday’s data also showed that the economy was flat in the third quarter in seasonally-adjusted terms, compared with a previous reading of 0.1% growth. Lopez Obrador has pledged to lift growth to 4%, but his decision to scrap a $13 billion airport project and a slump in construction have pummeled the country’s building industry.

“Activity is just not growing, and we continue to get more evidence that consumption and household demand keep losing momentum,” said Felipe Hernandez, a Latin America economist at Bloomberg Economics. “Taking services as a gauge of household demand, that used to be a source of positive growth, and it’s come down to zero.”

GDP shrank 0.3% from a year earlier in non-seasonally-adjusted terms. While oil output has long been a weak spot for the economy, services activity grew just 0.1% in the third quarter, down from rates of more than 2% throughout 2017 and 2018. Industrial activity including construction, oil output and manufacturing fell 1.4%. Primary activities including agriculture expanded 5.4%.

With inflation at its 3% target, the central bank has cut borrowing costs at its past three meetings to revive growth. Most analysts expect policy makers to lower the rate again by a quarter point from the current 7.5% in their final decision of the year on Dec. 19. The board in its Nov. 14 reduction highlighted the need to lower its growth forecast in the quarterly report scheduled for Nov. 27, saying that growth risks remain biased to the downside.

--With assistance from Rafael Gayol.

To contact the reporter on this story: Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, Bruce Douglas

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