Mexico’s economy expanded at the fastest pace in at least three decades in the third quarter, making up for part of the output lost during the pandemic as manufacturing surged to meet strong U.S. demand.
Gross domestic product climbed 12% from the previous quarter, according to preliminary data released by the national statistics institute on Friday. The result, the best in data going back to 1990, was in line with the 11.9% median estimate from economists in a Bloomberg survey.
Still, on an annual, non-seasonally adjusted basis, GDP fell 8.6% during the quarter, compared to an 8.9% estimated drop.
The recovery is marred by low fourth-quarter projections and fears of a second coronavirus wave. President Andres Manuel Lopez Obrador has rebuffed economists’ calls for bigger government spending similar to other large countries, arguing that a lighter debt load will make it easier for Mexico to rebound. As a result, the economy is seen plummeting 10% this year, the most in almost a century.
“The fact that there’s been a good quarter shouldn’t make us think the road ahead is going to be easy,” said Jessica Roldan, chief economist at Finamex, a Mexican brokerage, before the release. The prospect of a second wave “is generating a lot of uncertainty” while Mexico’s internal market is “very weak,” she said.
Industrial sectors, including mining, construction, and manufacturing, grew 22% compared to the prior quarter, while agriculture, livestock and fishing industries expanded 7.4%. Service activities including commerce, transportation, financial, and media gained 8.6% from the previous three months, according to the preliminary data.
Mexico’s quarterly rebound should be taken “with a grain of salt” given the previous steep decline, said Ernesto Revilla, head of Latin America Economics at Citigroup Inc. and former chief economist at the country’s Finance Ministry.
The improvement “looks good just because the base of comparison, the second quarter, was so bad because that’s where we had the brunt of the lockdown,” he said.
Mexico has been hit hard by the Covid-19 pandemic, with the country recording the world’s fourth-largest number of deaths. Lopez Obrador tried to balance the need to contain the disease with not imposing strict lockdowns when about half the population needs to work to eat each day.
Amid a backdrop of minimal fiscal stimulus, the nation’s central bank has slashed interest rates quickly to a four-year low of 4.5%.
Yet the industrial and services sectors are still deep in the red on an annual basis, contracting almost 13% and 8.8% respectively compared to the third quarter of 2019. Agriculture is the only area showing growth compared to last year, at 2.7%.
“It will probably take six years to recover the GDP Mexico had before the economic crisis, unlike the United States which will take little more than a year,” said Gabriela Siller, director of economic analysis at Grupo Financiero BASE.