Mexican Economy Grows for 16th Straight Quarter -- Update

By Anthony Harrup Features Dow Jones Newswires

Mexico chalked up its 16th consecutive quarter of economic growth in the April-to-June period as strong services output compensated for sluggish industrial production.

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Gross domestic product, a measure of output in goods and services, expanded 0.6% seasonally adjusted from the first quarter and was up 1.8% from a year before, the National Statistics Institute said Tuesday.

Growth from the first quarter, which translates into an annualized rate of 2.3%, was in line with the preliminary estimate published last month, but marked a slowdown from the 2.7% annualized growth in the previous quarter.

Increased employment, despite the impact of rising inflation on wages, has supported services that led growth in the second quarter, while industrial production was flat.

Services growth has averaged about 3.4% since the beginning of 2015, and could hold around that rate in the foreseeable future given the recovery in the labor market, said Marco Oviedo, head of Latin American research at Barclays.

But while manufacturing supports industrial production amid strong external demand, government spending restraints to meet fiscal targets are proving a drag on construction, and state oil company Petróleos Mexicanos is producing less oil and gas.

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The weakness in industry is mainly related to the public sector, Mr. Oviedo said. "They have been delivering on fiscal goals, but at a cost to growth."

The 1.8% expansion in GDP from the second quarter of 2016 was hurt by the Easter holiday in April. It brought growth for the first half of the year to 2.3%, compared with the first six months of 2016.

The economy is widely expected to slow in coming quarters, with private and government economists projecting a 2% expansion for the full year, down from 2.3% in 2016.

"So far economic growth has been better than expected, especially considering the pessimistic outlook at the end of last year and early this year, above all because of the risks of eventual disruption in Mexican-U.S. trade relations," Banco Santander said in a note.

The first round of discussions to redraw the North American Free Trade Agreement between the U.S., Mexico and Canada ended Sunday in Washington, and the next round is set for Sept. 1 in Mexico.

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

(END) Dow Jones Newswires

August 22, 2017 11:53 ET (15:53 GMT)