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Mexico’s economy grows while inflation rises; energy prices a concern

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Mexico’s economy grew at an annual rate of 1.7 percent in August, while inflation, during the 12-months leading into early October, rose 4.94 percent, authorities reported.

Mexico’s central bank chief, Alejandro Diaz de Leon, said he was concerned that energy prices could rise in coming months, making it harder to bring inflation down toward the bank’s 3 percent target.

The closely watched annual core price index, which strips out some volatile food and energy prices, rose 3.74 percent through the first half of October, in line with estimates but up from 3.56 percent in early September.

Mexican consumer prices rose 0.40 percent during the first half of October compared to the prior month, while the core price index climbed 0.17 percent in early October.

The Global Economic Activity Indicator (IGAE) grew 3.3 percent in July, the second highest growth rate so far this year, according to historical data from INEGI, the statistics bureau.

IGAE is considered as a “monthly GDP” by analysts, since it represents nearly 95 percent of the economic activity and allows them to see the evolution of real sector in the short term.

Mexico’s industrial activity grew 0.2 percent year-on-year in August while the agricultural sector increased 1 percent in the same time period, data released from Inegi revealed.

The services sector, the largest economic contributor, grew 2.4 percent in August on a year-to-year basis.

The IGAE fell 0.1 percent in August from the previous month.

In a letter to its customers, financial group Banorte said the IGAE numbers suggest that Mexico’s economy has returned to a moderate rhythm of growth.

“The sectoral breakdown suggests that consumption and domestic demand remain relatively strong and will continue to be the main driver of growth, supported by good performance in the labor market,” Banorte said.

“The manufacturing sector also remains healthy in spite of a slowdown in August, spurred by good performance in the economy of the United States, although there are some signs of increased caution moving forward that come from slower global growth,” it added.

Mexico’s GDP grew 2 percent in 2017. This year Mexico could register an economic growth of 2 to 2.6 percent, according to the forecast by the Central Bank of Mexico.

Sources: Reuters, Bank of Mexico

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