(Adds details on cut to official growth forecast)
By Michael O‘Boyle
MEXICO CITY, Aug 20 (Reuters) - Mexico trimmed its 2015 growth forecast on Thursday as it grapples with falling oil output and patchy export demand from the United States, though the economy ticked up in the second quarter on the strongest expansion of the service sector in a year.
The Finance Ministry trimmed its growth outlook for this year to a range of 2.0 percent to 2.8 percent from a previous forecast of 2.2 percent to 3.2 percent, after data showed industrial output was flat in the second quarter.
The economy expanded by 0.5 percent in the April-June period compared with the first quarter, just above expectations and the 0.4 percent rate in the first quarter, the national statistics agency said on Thursday.
Growth in services ticked up to 0.9 percent from 0.7 percent in the prior quarter, its fastest pace since the second quarter of 2014.
But flat industrial output, which includes factory and crude oil production, reflected uneven exports to the United States and sinking oil production at ailing state oil giant Pemex .
Deputy Finance Minister Fernando Aportela said disappointing industrial output in the United States, Mexico’s top trading partner, and declining oil production weighed on Mexico’s economy.
Deutsche Bank economist Alexis Milo, echoing Aportela, said in a client note that industrial output “remains the main concern for growth.”
The Banco de Mexico is expected to hike interest rates soon after the U.S. Fed begins to raise borrowing costs, as it seeks to halt a sharp slide in the peso.
Marco Oviedo, an analyst at Barclays Capital in Mexico City, said in a note that he now expects Mexico’s central bank to wait until December to hike interest rates, given slow growth.
Heavy spending by candidates and local governments ahead of elections this July likely boosted consumption during the quarter, he added.
Consumer confidence slid in July by the most in three months while Mexican auto output and exports fell in July.
On an annual basis, gross domestic product grew 2.2 percent in the second quarter from the same period in 2014 below an upwardly revised 2.6 percent expansion in the prior period. Analysts polled by Reuters saw a 2.1 percent expansion.
Mexico’s central bank earlier this month cut its 2015 growth forecast to between 1.7 percent to 2.5 percent.
In a separate report, Mexico’s monthly economic activity index rose 0.3 percent in June compared with the prior month, the agency said as services and industrial output rose. (Reporting by Alexandra Alper and Michael O‘Boyle; editing by Simon Gardner and G Crosse)