Mexican growth fuelled by domestic demand

03.04.2015 By: Based on Focus Economics

In the fourth quarter of 2014, Mexico’s GDP increased 2.6% over the same quarter last year, which marked a slight acceleration over the 2.2% increase observed in the previous quarter. Mexico’s gross domestic product increased 2.1% in 2014, which came in above the 1.4% expansion observed in 2013.

Q4’s print reflected that domestic demand improved on the back of strong growth in private consumption and fixed investment. The external sector also contributed to overall economic growth as exports of goods and services increased at the fastest pace in nearly four years. On the domestic front, private consumption grew 2.7% annually in Q4, faster than the 2.2% increase tallied in Q3. Fixed investment expanded a healthy 5.8% in Q4 (Q3: +4.3% year-on-year), while government consumption growth decelerated from 3.2% in Q3 to 1.9% in Q4.

On the external front, exports of goods and services accelerated from a 7.1% expansion in Q3 to a 10.3% increase in Q4. Exports growth was the fastest since Q1 2011. Imports also picked up pace from a 6.0% increase in Q3 to an 8.1% expansion in Q4, which also confirms the recovery in domestic demand. Consequently, the contribution from net exports to overall economic growth rose from 0.3% in Q3 to 0.8% in Q4.

Mexico’s Central Bank (Banxico) revised Mexico’s growth forecasts and now expects the economy to grow between 2.5% and 3.5% in 2015 (previous estimate: between 3.0% and 4.0%). For 2016, the Bank also lowered its projections and now sees the economy growing between 2.9% and 3.9% (previous estimate: between 3.2% and 4.2%).