Overview
Preliminary figures released Thursday by Mexico's national statistics agency INEGI indicate that the country's economy shrank 0.8% in the first quarter when compared with the previous three-month period. That quarterly decline was deeper than the 0.5% contraction economists polled by Reuters had anticipated and marked a reversal from a revised 0.9% expansion in the prior quarter.
Sectoral performance
INEGI's preliminary breakdown shows that every major sector of the economy posted declines over the quarter. The primary sector experienced the steepest fall, contracting 1.4% on a sequential basis. Secondary activities, which include manufacturing, declined 1.1%. Tertiary activities, which cover services, recorded a 0.6% sequential decrease.
Year-over-year comparison
Measured against the same quarter a year earlier, growth in the first quarter reached 0.1%. This annual change fell short of economists' expectations of a 0.8% expansion for the period.
Implications and context provided by the data
The preliminary release signals a broad-based slowdown across primary, secondary and tertiary activities within Latin America's second-largest economy. The quarterly contraction and the lower-than-expected annual growth figure both reflect a softer performance relative to market forecasts and to the prior quarter's revised expansion.
Key points
- Mexico's economy contracted 0.8% in the first quarter versus the previous three months, according to INEGI's preliminary data released Thursday.
- All three activity groups declined sequentially: primary -1.4%, secondary (including manufacturing) -1.1%, and tertiary (services) -0.6%.
- Year-on-year growth for the quarter was 0.1%, below economists' projected 0.8% expansion.
Risks and uncertainties
- The steeper-than-expected quarterly contraction introduces uncertainty for sectors tied to production and exports, particularly manufacturing within secondary activities.
- Service sector softening, reflected by a 0.6% sequential decline, poses downside risk to labor and consumption-linked markets dependent on tertiary activity.
- Weak performance in the primary sector, down 1.4%, adds vulnerability to areas reliant on agriculture and extractive industries.
Conclusion
INEGI's preliminary numbers portray a decline across Mexico's main economic sectors in the first quarter, with both the quarterly contraction and the subdued year-on-year growth coming in worse than consensus forecasts. The data underline near-term headwinds across production, services and primary activities, relative to expectations set by economists polled by Reuters.