October 28, 2019 / 5:02 PM / 2 months ago

Mexican trade data points to contraction in economy, central banker says

MEXICO CITY (Reuters) - Recent weakness in Mexican exports suggests the economy likely contracted in the third quarter, central bank board member Jonathan Heath said on Monday.

Heath said on Twitter Mexico’s latest trade data suggested economic activity may have shrank in September compared with the previous month, which meant there was a “high probability that GDP in the third quarter ends up in negative territory”.

The trade figures showed Mexico posted a $449 million trade surplus in September, adjusted for seasonal swings, but also highlighted that exports had declined.

Exports fell by 5.3% versus the previous month in seasonally adjusted terms, and by 1.3% versus a year earlier in unadjusted terms, data from the INEGI statistics agency showed.

JP Morgan analysts wrote in a report this month that despite sluggish domestic activity, “the one silver lining has been external demand, as, contrary to our expectations, it is likely to add to growth this year”.

A drop in exports therefore does not bode well for the economy, which grew by just 0.1% in August from July and contracted 0.2% in July from June in adjusted terms, revised data showed.

Latin America’s second-largest economy barely escaped a recession in the first half of the year, after posting no growth in the second quarter and contracting in the first.

Investor confidence has been shaken by decisions by President Andres Manuel Lopez Obrador, a leftist exponent of economic nationalism who took office in December vowing to reduce inequality and deliver average annual growth of 4%.

INEGI will publish preliminary gross domestic product data for the third quarter on Wednesday.

Reporting by Sharay Angulo; Writing by Anthony Esposito; Editing by Alison Williams and David Holmes

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