July 31, 2017 / 1:52 PM / a year ago

UPDATE 2-Mexican growth eases slightly in second quarter, services cooling

(Adds details, comment from analysts)

MEXICO CITY, July 31 (Reuters) - Mexican economic growth slowed slightly in the second quarter from the first three months of the year as expansion in services cooled, a preliminary estimate showed on Monday.

Mexico’s economy expanded by around 0.6 percent in the second quarter in seasonally adjusted terms, the national statistics agency said, compared with growth of 0.7 percent during the first quarter.

Mexico’s economy has largely shrugged off fears of economic disruption prompted by the election of U.S. President Donald Trump, but there were signs that domestic consumption is slowing.

Compared with the same quarter a year earlier, the economy grew by 1.8 percent in unadjusted terms, the agency said.

The quarter-on-quarter growth significantly outpaced forecasts by a number of banks in Mexico.

Analysts at Capital Economics described the quarterly performance as “solid” in a note to clients, adding that the economy would likely slow in the second half of 2017.

“We remain comfortable with our above-consensus forecast for GDP (gross domestic product) to expand by 2.2 percent over 2017 as a whole,” Capital wrote.

Businesses in the country have had to contend with higher interest rates brought on by a spike in inflation. Interest rates are at their highest level since early 2009, and tighter access to credit could dampen economic activity.

A breakdown of the GDP figures showed growth was held back by primary activities, which include agriculture. They posted a contraction of 2.0 percent from the first quarter.

Tertiary activities, which include retail and services, increased by 0.8 percent compared with the previous quarter, slower than a 1.0 percent rate seen in the first quarter.

Growth in industry remained anemic, weighed down by sluggish oil production, holding steady at the 0.1 percent quarter-on-quarter rate seen in the first three months of the year.

In the first half of 2017, the economy grew by 2.3 percent, the national statistics agency said.

Trump took office in January threatening to impose punitive tariffs on Mexican-made goods, but those tariffs have not materialized. The United States, Canada and Mexico are due to begin renegotiating the North American Free Trade Agreement (NAFTA) next month.

The finance ministry and the central bank are both forecasting growth of between 1.5 percent and 2.5 percent this year.

A separate, seasonally adjusted estimate by the agency looking at growth on an annual basis showed the economy expanding by 3.0 percent from the second quarter of 2016. (Reporting by Dave Graham; Editing by Jeffrey Benkoe and Meredith Mazzilli)

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