February 25, 2019 / 3:29 PM / 5 months ago

UPDATE 2-Mexico's economic outlook dims after weak finish to 2018

(Adds economist comment, background, context)

By Dave Graham

MEXICO CITY, Feb 25 (Reuters) - Mexico’s economy grew less than first estimated in the fourth quarter as activity contracted in December, the first month of President Andres Manuel Lopez Obrador’s administration, data showed on Monday, clouding the outlook for 2019.

Figures from the national statistics agency showed that Latin America’s second-biggest economy grew 0.2 percent in the October-December period from the previous quarter in seasonally adjusted terms. That was one tenth of a percentage point less than a preliminary figure published on Jan. 30.

A separate report by the agency showed Mexico’s economy shrank by 0.4 percent in seasonally adjusted terms in December in comparison to the previous month. Activity slipped across all main sectors of the economy, the figures showed.

The data follow warnings from bosses that recent strikes and blockades threaten growth under Lopez Obrador, a leftist whose business credentials have long been questioned by critics nervous about his ability to run the economy.

Wall Street bank Goldman Sachs on Monday cut its 2019 Mexican growth forecast to 1.5 percent from a prior estimate of 1.7 percent, the latest private sector institution to take a dimmer view of the outlook.

Goldman Sachs economist Alberto Ramos said “market apprehension” about Lopez Obrador’s policies could crimp activity and make businesses more cautious.

That could be partly offset by other factors, including signs of a slowdown in inflation that would support real wage growth, Ramos wrote in a note to clients.

Compared with the same quarter a year earlier, the economy expanded by 1.7 percent. Overall, Mexico’s economy grew 2.0 percent last year, down by a tenth of a percentage point from 2017. The government is forecasting growth of 2.0 percent for 2019.

Lopez Obrador took office after a five-month transition marked by volatility on Mexican financial markets, much of it triggered by his announcement in late October he would cancel a new, partly-built $13 billion Mexico City airport.

That decision put him at odds with much of Mexico’s business establishment. The start of his term also saw a spate of departures from the public sector as Lopez Obrador vowed to cut wages for the best-paid state employees.

Manufacturing has also been weak, according to the IHS Market Purchasing Managers Index, which showed activity slipping in November and December. It improved in January, though activity was only just in positive terrain.

The economy also slowed during the last change of administration in Mexico, where presidents can only serve a single six-year term. (Reporting by Dave Graham; Editing by Steve Orlofsky and James Dalgleish)

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