February 23, 2018 / 3:36 PM / 25 days ago

UPDATE 2-Mexico economy misses growth forecast in Q4, slows from 2016

 (Adds analyst commentary)
    By Daina Beth Solomon
    MEXICO CITY, Feb 23 (Reuters) - Mexico's economy grew at a
more tepid pace than projected in the fourth quarter to cap last
year's growth at 2 percent, slowing amid inflation, political
uncertainty and declining oil production.
    Gross domestic product in Latin America's second-biggest
economy expanded 0.8 percent in the fourth quarter from the
previous three-month period, the national statistics agency said
on Friday.
    Preliminary data last month had estimated growth of 1
    "It's a big miss," said Benito Berber, an analyst at Nomura
Securities in New York, referring to the quarterly figures. "The
Mexican economy seems to be slowing down."
    The economy grew 0.7 percent in December from the previous
month, slightly slower than November's pace, and signaling
potential weakness that could leech into 2018, a separate report
from the statistics agency showed.                          
    Mexico's economy has grown at sluggish rates during the
administration of President Enrique Pena Nieto, who had promised
to supercharge growth through key economic reforms, with the
2013-14 opening of the state-dominated oil industry.
    Oil was the hardest hit sector of Mexico's economy last
year, shrinking more than 10 percent compared to 2016.
    In the fourth-quarter data, the industrial sector overall
weakened 0.1 percent, while services expanded 1 percent and
agriculture grew 2.1 percent. 
    The government has forecast that as a result of its reforms,
some of the world's largest oil companies will ultimately invest
about $150 billion in Mexico if they succeed in extraction
efforts, though growth may be several years away.
    Andres Manuel Lopez Obrador, the presidential front-runner
ahead of Mexico's July 1 elections, would make dramatic changes
to energy strategy to boost productivity, his campaign said on
    In the fourth quarter, the economy grew 1.5 percent from the
same quarter the previous year, slower than a preliminary rate
of 1.8 percent. The economy expanded 2 percent in full-year 2017
compared with the year before.
    That expansion was slower than 2016's 2.9 percent growth,
but held up despite inflation, declining oil production and
uncertainty around presidential elections as well as the
renegotiation of the North American Free Trade Agreement,
Goldman Sachs analyst Alberto Ramos said in a report. 
    He anticipated, however, that private consumption will be
dragged down in the coming months due to quickening inflation
that has pushed the central bank to hike interest rates to the
highest in nine years.             
    "Activity proved more resilient than expected ... but there
are now a number of signs that the forward momentum may be
softening," Ramos wrote.

 (Reporting by Daina Beth Solomon and Michael O'Boyle; editing
by David Gregorio, G Crosse)
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