Mexican economy contracts for first time in over three years
MEXICO CITY (Reuters) - Mexico's economy shrank in the second quarter, the first quarterly contraction in more than three years, as the industry and services sectors slumped, grim news for Latin America's No. 2 economy.
The economy shrank by 0.74 percent in the second quarter compared with the first quarter, the national statistics agency said on Tuesday, well below forecasts in a Reuters poll for a 0.21 percent expansion.
In the first quarter, the economy grew 0.03 percent from the 2012 fourth quarter, according to new methodology that uses 2008 as a base year. Under the prior methodology, first-quarter gross domestic product was up 0.45 percent compared to the last quarter of 2012.
Mexico's growth disappointed in the first half of 2013 as lower government spending, easing consumption and weaker demand for exports weighed, prompting the finance ministry to revise growth forecasts for the year downward to 3.1 percent.
But the central bank, which cut its own economic growth outlook for 2013, is confident growth will pick up in the second half.
The bank cut interest rates to a historic low of 4 percent in March but is not expected to take advantage of cooling inflation and weaker growth to cut rates further this year, as it eyes the U.S. Federal Reserve's potential wind-down of its economic stimulus program.
Fears of a tapering of the Fed's bond-buying program, which has supported appetite for risky assets, hit Mexico's peso hard in June but the currency has since steadied.
The statistics agency said economic growth in 2012 was 3.8 percent, down from the previously announced 3.9 percent.
Second-quarter growth compared with a year earlier was 1.5 percent, well short of expectations for 2.32 percent in a Reuters poll.
Year-on-year growth in the first quarter was 0.6 percent, according to the new methodology. According to the prior method, growth in the first quarter compared to a year ago was 0.80 percent, its weakest in more than three years.
(Reporting by Alexandra Alper; Editing by John Wallace)
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