Bloomberg News

Mexico Economic Growth Eased in Fourth Quarter on U.S. Sales

February 17, 2012

(Updates with comment from analyst in fourth paragraph.)

Feb. 16 (Bloomberg) -- Mexico’s economic growth weakened in the fourth quarter as a slowdown earlier in the year in the U.S. crimped exports to the Latin American country’s biggest trading partner.

Gross domestic product rose 3.7 percent from the year earlier, down from 4.5 percent in the previous quarter, the national statistics agency said on its website today. That was in line with the median forecast of 18 economists in a Bloomberg survey. In the full year, the economy expanded 3.9 percent.

Growth may not slow much further following a pick-up in the U.S. economy in the past few months, closing the door on any possible interest rate cuts, Marcelo Salomon, co-head of Latin America Economics at Barclays Plc in New York, said in a research note today. Barclays ditched its forecast for a 50 basis-point rate cut in March following today’s GDP numbers.

Barclays “now expects Banxico to keep its target rate flat at 4.5 percent throughout 2012,” Salomon wrote in a report. Mexico’s robust growth “and the better-than-expected batch of U.S. economic releases” mean the central bank will maintain its neutral stance.

Claims for U.S. jobless benefits dropped last week to the lowest level in four years, the Labor Department said today. Applications for unemployment insurance payments decreased by 13,000 in the week to Feb. 11 to 348,000, less than the lowest forecast of economists surveyed by Bloomberg and the fewest since March 2008.

‘Many Signals’

“What we are seeing are many signals that the first quarter of this year could keep being very positive,” said Delia Paredes, chief economist at Grupo Financiero Banorte, in Mexico City.

Full-year growth in Latin America’s second-biggest economy slowed from 5.5 percent in 2010 as a U.S. slowdown in the first half of 2011 took a few months to affect the Mexican economy, Gabriel Casillas, chief Mexico economist at JPMorgan Chase & Co. said.

“It caused Mexico to generate less employment in the final quarter,” Casillas said by phone.

Growth in exports to the U.S., which represents 80 percent of Mexico’s sales abroad, slowed to 15.1 percent in 2011 from 28.9 percent in 2010, according to data from Citigroup Inc.’s Banamex unit.

‘Great Strength’

The peso strengthened 0.4 percent to 12.8320 per dollar as of 12:46 p.m. Mexico City time. The currency has strengthened 8.6 percent this year, joining the Brazilian real as the best performer against the dollar among the 16-most traded currencies tracked by Bloomberg.

Mexico’s central bank kept its economic growth and inflation forecasts unchanged for this year at 3 percent to 4 percent, according to its quarterly inflation report published yesterday. Finance Minister Jose Antonio Meade on Jan. 5 said economic growth will slow to about 3.5 percent this year.

“The internal market has lent a great strength to the Mexican economy in these months,” central bank Governor Agustin Carstens told reporters upon releasing the report.

--Editors: Philip Sanders, Robert Jameson

To contact the reporter on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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