Mexico turning the corner

The past month has brought signs that Mexico’s economy is finally turning the corner. latestdata suggest that the Mexican economy has turned the corner. GDP expanded by a seasonally-adjusted 1.0% q/q in the second quarter, accelerating from +0.4% q/q in the first quarter and just +0.2% q/q in Q4 of last year. The pick-up was broad based and there are several reasons to expect the economy to gather momentum over the coming months. For a start, stronger growth in the neighbouring US should boost demand for exports. At the same time, stronger government spending is bolstering domestic demand, while macro reforms and an ambitious public-private investment plan look set to raise potential growth further ahead. With relatively low inflation to enable interest rates to remain close to historic lows for the foreseeable future, we think that GDP could expand by as much as 3% this year and by about 4% in 2015-16.