May 22, 2014 / 4:22 PM / 3 years ago

Mexican growth seen picking up some pace in first-quarter

MEXICO CITY (Reuters) - Mexico's economy likely picked up some speed in the first quarter after a weak end to 2013, helped by a rebound in building even as sluggish domestic demand and uneven factory output weighed on growth.

Latin America's No. 2 economy was expected to have grown 0.46 percent in the first quarter compared to the last quarter of 2013, when it grew 0.2 percent, according to a Reuters poll of 11 analysts.

The data will be released by the national statistics institute on Friday at 8 am.

More government spending on infrastructure this year has helped pull the construction sector back from a sharp contraction in 2013, but exports stagnated and factory output dipped in March.

Mexico exports mostly manufactured goods and nearly 80 percent of exports go to the United States, where a harsh winter hurt the economy in the first quarter.

Domestic demand has also been weak. Mexican unemployment rose to its highest in more than a year in March and retail sales slipped during the first two months of the year.

Mexico's central bank estimates Latin America's no. 2 economy grew 0.6 percent in the first quarter compared with the prior three months.

The central bank held its main interest rate steady last month at 3.5 percent. Inflation is easing back from a January spike due to new taxes, which also weighed on growth in the first quarter, and less price pressures give policymakers room to leave interest rates low to support the economy.

At an annual pace, the economy is seen expanding 2 percent compared to the first quarter of 2013, the poll showed, up from a 0.7 percent annual rate in the fourth quarter of last year.

After the data's release, the finance ministry is expected to cut its 3.9 percent growth outlook for 2014 after the economy proved weaker than expected early this year.

Private sector economists have cut their outlook to around 3 percent for 2014 after the wobbly start of the year.

Mexico's central bank on Wednesday slashed its 2014 growth forecast to between 2.3 percent and 3.3 percent from a previous estimate of 3 percent to 4 percent.

Reporting by Jean Luis Arce. Writing by Michael O'Boyle; editing by Andrew Hay

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