Latin America’s second-largest economy struggles amid sluggish Q3 growth

A final reading of Mexico’s third quarter economic growth today will confirm the economy expanded marginally at a rate of 0.1% in the three months to September.

Latin America’s second-largest economy underperformed already dreary estimates of 0.2% to 0.3% growth. With a stagnant services sector and shrinking manufacturing, the reading represents a 0.4% year-on-year contraction, the first such occurrence since Q4 in 2009.

Though he has promised 4% annual growth, the Mexican economy has been sluggish so far under President Andres Manuel Lopez Obrador (AMLO). Q4 is likely to see similarly stagnant activity.

With employment growth falling two points from 4% at the start of 2019, consumer spending is likely to slow over the coming months and prolong the country’s economic stagnation. Such prospects, along with a continued drop in oil revenue from the state-owned Pemex, will likely force a downgrade of both Pemex and Mexican bonds. This would spook investors, depriving the economy of much-needed investment in the medium term. To kickstart growth, look for AMLO to pursue wealth redistribution policies to stimulate lower and middle-class spending.