Economy of Mexico Picks Up Momentum

Mexico’s economy grew at its fastest pace of the year in the third quarter, powered by services and a strengthened farm sector.

The gross domestic product for the three months that ended Sept. 30 was up 3.3% from the same period last year, according to figures released Wednesday by the Treasury Ministry.

It was the best quarterly performance since the final three months of 2004, and a strong acceleration from the second quarter of this year, when the nation’s economy posted growth of 2.4% from the same period a year earlier.

“It’s a good number,” said Gray Newman, an analyst with Morgan Stanley in New York. “The main driver is the service sector.”

Newman noted that Mexico’s third-quarter growth would have been even more impressive using U.S. methodology.

In the United States, quarterly GDP growth figures express how much the economy expanded on an annualized basis compared with the previous three-month period, rather than the year-earlier quarter. By that measure, Mexico’s GDP grew at a 8.9% rate in the third quarter, Newman said.

The GDP is the estimated value of all goods and services produced in an economy.

The news helped boost Mexico’s stock market 0.7%, to a record high of 16,310.68 on Wednesday. Mexico’s IPC stock index has been one of the world’s best performers in 2005, up 26.3% so far this year.

Mexico’s GDP got some help from its agricultural sector, which was up 10.6% from a year earlier.

But services, which account for about two-thirds of Mexico’s economy, were the key. Industries such as finance, real estate and communications grew by more than 6%, while the retail sector expanded 3.1%.

Newman said consumer credit in Mexico had been expanding more than 25% a year for the last five years, helping to support retail spending.

However, Mexico’s industrial sector continued its lackluster performance in the third quarter, expanding an anemic 0.6%.

Alberto Bernal-Leon, an analyst with Bear Stearns in New York, said Mexico needed to reform its labor, tax and energy regulations if it hoped to keep up with competitors. He estimates that Mexico will end the year with 3.2% growth in GDP, one of the slowest rates in Latin America.

“Mexico easily should be growing by more than 5% every year,” Bernal-Leon said. “It’s not happening. And the reason it isn’t happening is the lack of reforms.”