Mexico's Economy Slows Less than Expected -- Update

By Anthony Harrup Features Dow Jones Newswires

Mexico's economic growth slowed less than expected in the second quarter as robust output in services continued to compensate for a modest advance in industrial production.

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Gross domestic product, a broad measure of output of goods and services, expanded a seasonally adjusted 0.6% from the previous quarter, and was up 1.8% from the second quarter of 2016, according to a preliminary reading published Monday by the National Statistics Institute. The next GDP report is due Aug. 22.

The increase marked a 16th consecutive quarter of growth, and defied expectations at the start of the year that the economy would slow to a crawl amid concerns that the U.S. under President Donald Trump would jeopardize trade and investment relations between the North American neighbors.

"Today's data should further allay the fears of a collapse in the Mexican economy that emerged in the aftermath of the U.S. election. In particular, the strength of the domestically focused services sectors suggests consumer spending remains resilient," Capital Economics' Latin America economist Adam Collins said in note.

Higher local interest rates and inflation could still cause a slowdown in the second half, although the renegotiation of the North American Free Trade Agreement -- set to start mid-August -- is unlikely to hit business and consumer confidence, he added.

Growth from the first quarter was ahead of economists' expectations of 0.2%, and translated into an annualized 2.4%, a slowdown from the first quarter's 2.7% expansion.

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Industrial production edged up 0.1% nonannualized from the first quarter while services grew 0.8%.

Strength in manufacturing, supported by demand for exports, has offset a sluggish construction sector and lower oil and gas production. Services continue to be supported by employment growth, despite pressure on wages from this year's acceleration in inflation.

Output compared with a year earlier was affected by the Easter holiday in April, which gave the second quarter fewer working days than in 2016. Adjusted for the calendar effect, output was 3% higher than a year before, the statistics institute said.

The Mexican economy expanded 2.3% in 2016, and is expected to grow around 2% this year.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

July 31, 2017 11:22 ET (15:22 GMT)