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The year-over-year GDP growth continues to slide down as quarterly growth remains sluggish.
GDP is by far the most telling macroeconomic indicator of economic growth in a country. Its biggest drawback is that data is generally lagged, which means it is good only for confirming known existing trends.
In the case of Mexico, the latest GDP growth figures show how economic growth continues to slide down. On a yearly basis, growth posted its fourth consecutive drop in growth. On a quarterly basis, the data posted the fourth quarterly growth below 1%. At this rate, Mexico will be lucky if it breaks 3% yearly growth.
The drop in Q1 was driven mainly by the 1.5% yearly drop in the industrial sector, which suffered a steep slowdown after a fake recovery hope on the back of the recovery of the U.S. auto industry late last year. Both the agricultural and services sector posted increases of 2.8% and 1.9%, respectively, though it was not enough to offset the industrial slump.
Given that GDP growth data, we need to turn to leading indicators, such as the manufacturing PMI. The PMI for April showed yet another decline in growth, painting a gloomy picture for Mexico in at least the short-term.
It is important to keep in mind that Mexico’s economy is closely linked to that of the United States, so when the recovery winds start blowing over the American economy, Mexico will likely be lifted. Until then, it seems the economy will not regain meaningful strength.
© 2013 Market Realist, Inc.