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Good News on Mexican Growth, but Can It Last?
 Ronald Buchanan - The Financial Times
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August 21, 2010
Mexico City - Felipe Calderón, the Mexican president, Twittered early today that he was hoping for “good news” later in the day from Inegi, the national statistics office. And so it came to pass, in the shape of a 7.6 per cent year-on-year increase in GDP.
That was good indeed - the most since 1998. Not quite good enough, perhaps, to open the champagne, though one might venture a modest glass of tequila.
After all, the 2009 second quarter saw a 10 per cent drop in economic activity, mainly as a result of the US recession but also as a consequence of the swine flu epidemic. In all, Mexico’s economy suffered an annus horribilis in 2009, declining 6.5 per cent. As a result, GDP has yet to return to its level of a couple of years ago.
Even so, the trend is now moving in the right direction. The economy grew by 3.2 per cent in the second quarter of this year from the previous quarter.
The big question is whether it can last. And the answer lies north of the border, as often is the case in Mexico, whose resurgent manufacturing sector depends heavily on US consumer demand.
That connection is made plain in this chart from Lombard Street Research:
As Lombard’s Maya Bhandari explains in a note today, “Through imports of Mexican goods, the United States accounts for a whopping quarter of the entire Mexican economy and has fuelled half of total real growth over the last few cycles.”
With the US set to report its own Q2 GDP figures next Friday, all eyes will stay pointed northward.
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