Mexico’s Q1 growth topped estimates – despite Trump trade fears

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Mexico’s economy grew 0.6 per cent during the first three months of the year from the fourth quarter, confirming an upward trend that has triggered a spate of upgrades in 2017 forecasts – something unheard of here in recent years given the economy’s largely disappointing performance.

The figure topped estimates for a 0.5 per cent growth pace.

On a year-on-year basis, gross domestic product expanded 2.7 per cent, also better than the 2.5 per cent growth the market had expected.

“First quarter GDP data from Mexico confirmed what we have long suspected – that the survey data have been overstating the weakness in the real economy,” said Adam Collins, Latin America economist at Capital Economics. “Today’s data also reinforce our long-held view that the economy is unlikely to collapse in the face of uncertainty surrounding future trading relations with the US.”

Data from Mexico’s GDP proxy, published earlier this week, pointing to 2.2 per cent growth in February on a seasonally-adjusted basis, had already been encouraging.

Export data showing a 13.9 per cent annual rise in manufacturing exports in March and 10.5 per cent rise in imports of capital goods were further signals of an economy picking up steam and reflected expectations of a gradual recovery in manufacturing in the US, the home for over 80 per cent of Mexican exports.

Some analysts had been targeting expansion of as much as 3 per cent in the first quarter, a far cry from fears just a few months ago that Donald Trump’s presidency could slam the brakes on Mexican growth and investment and, in a worst-case scenario, push the country into recession.

The economy grew 2.3 per cent last year but the median of forecasts for this year, in surveys compiled by Citibanamex and the central bank, has been pointing to growth of 1.5 or 1.6 per cent. However, several institutions – Santander, Citibanamex, BBVA Bancomer, JP Morgan and Finamex – have upgraded their forecasts for this year in the past few days and weeks. The most bullish is Santander, on 2.2 per cent.

Mexico’s government will be encouraged by the GDP news, coming on top of the relief over US Mr Trump’s decision not to nix Nafta – for now, at least – and Moody’s upholding Mexico’s A3 sovereign credit rating after having it on watch for a downgrade.

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