Mexico: Recession still forecast for 2017 despite November positive surprise - Wells Fargo

Analysts from Wells Fargo, explained the positive surprise of GDP growth in November in Mexico but they expose negative details and still see a recession in 2017. 

Key Quotes: 

“The Mexican economy grew 0.2 percent in November 2016 compared to October, seasonally adjusted, and by 3.7 percent compared to a year earlier, not seasonally adjusted.”

“The biggest reason for the strength in Mexican economic activity during the 11th month of the year was a surge in primary sector activity, that is, in output from the agriculture and cattle sector. This sector improved 3.8 percent compared to October and 12 percent versus November 2015.”

“Meanwhile, the service sector posted a decent 0.2 percent growth rate compared to October while growing at a very strong rate of 4.5 percent versus a year earlier and not seasonally adjusted.”

“We know that the strong growth rates in the primary sector are not sustainable and will remain volatile and are waiting for a slowdown in the service sector of the economy; this is what has been built into our recessionary forecast for this year.”

“November’s economic activity results mean that the Mexican economy has grown 2.3 percent during the first 11 months of 2016 compared to a year earlier. We forecast economic growth of 2.2 percent for the whole of 2016, which means that we expect weaker growth in December. Furthermore, we are keeping our call for a recession in 2017 as we believe that the economy will continue to weaken in 2017.”