Mexico marked the end of one of the world's deepest recessions in the third quarter, growing for the first time in a year due to stronger demand in the United States for exports like cars and steel. Total economic output rose 2.9 percent during the July-September period, the biggest gain since 1996, the national statistics agency said on Friday.
But highlighting the severity of the downturn, Mexico's gross domestic product was still 6.2 percent smaller in the quarter than it was the same time last year. Mexico's economy fell off a cliff late last year after the implosion of the American housing market choked off US consumer demand for its exports.
Mexican factories shut down periodically and laid off hundreds of thousands of workers, sending the unemployment rate skyrocketing and spreading the economic fallout to other sectors like retail stores. Mexico's industrial sector has shown signs of recovery in recent months on rekindled demand from the United States, which buys about 80 percent of Mexican exports. Exports rose in both August and September.
"It looks like foreign markets, especially the United States, are perking up a little," said Roberto Marquez, who is head of business operations at Mexican steel maker Villacero. Mexican steel exports rose to 956,000 tonnes in the third quarter, up 3 percent from the previous quarter, according to data from the national steel chamber. It expects total output will rise 14.5 percent next year after dropping 21 percent this year.
REBOUND IN SERVICES Mexican car factories are also doing better, thanks in part to some hefty US government subsidies for American car buyers in recent months. Mexican auto output posted its fourth straight monthly increase in October. The recovery in Mexican industry appears to be helping the service sector as companies rehire and workers spend their paychecks. Mexican firms added more than 100,000 workers to their payrolls during the quarter and another 80,000 in October.
The service sector grew 4 percent in the third quarter from the previous quarter, the statistics agency reported. Luis Arcentales, an economist at Morgan Stanley in New York, cautioned that some of that rebound was due to one-time effects. Mexico got back to business in the third quarter after a swine flu epidemic shut down swaths of the economy in the previous months.
"We should see positive growth in the fourth quarter as well," Arcentales said. "But the third-quarter bounce was quite strong and seeing that again is very unlikely." In all, gross domestic product contracted during four consecutive quarters through June of this year. The economy is seen contracting about 7 percent this year, which would be one of the steepest falls in the world, though less severe than declines in some Eastern European countries. Mexico's economy has not shrunk that much since 1932.
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