Mexican economy grows less than one percent for third straight quarter

Gross domestic product (GDP) had been expected to expand 0.8% in seasonally-adjusted terms in the second quarter, a Reuters poll of analysts found earlier this week.

“Very good news, INEGI reports growth above expectations for the second quarter,” Bank of Mexico deputy governor Jonathan Heath wrote on Twitter.

A breakdown of the GDP figures showed a 1% quarterly jump in the tertiary sector, which covers services, as tourism continued to fuel recovery, economists said.

Primary activities, such as farming, fishing and forestry, as well as secondary activities, which include manufacturing and agriculture, both rose 0.9%, the data showed.

Analysts at Capital Economics revised up their 2022 growth forecast for Mexico by 0.5 percentage points to 2.3% following the data, but predicted leaner times ahead.

“The big picture is that weakness in the U.S. and tight policy at home will weigh on growth over the coming quarters and Mexico’s recovery will continue to lag behind those in the rest of Latin America,” they said in a research note.

Fitch director Carlos Morales said: “U.S. external demand continues to boost manufacturing but an increasing likelihood of a U.S. recession remains a key risk for Mexico’s growth prospects.”

Mexico’s President Andres Manuel Lopez Obrador said earlier this week he was optimistic about the economy, telling reporters he ruled out a recession next year, despite a gloomier outlook for the health of the global economy.

“Investment will remain a drag on economic growth as heightened global uncertainty and policy intervention disrupts business confidence,” Fitch’s Morales added.

Year on year, the economy expanded 2.1% in the second quarter, the INEGI data showed.