Mexico economy likely shrank for first time in four years after quakes

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MEXICO CITY (Reuters) – Mexico’s economy likely shrank for the first time in more than four years during the third quarter, a preliminary official estimate showed on Tuesday, after the country was battered by earthquakes and hurricanes in September.

FILE PHOTO: A street damaged during the earthquake on September 19th is pictured in Colonia del Mar neighbourhood in Tlahuac, Mexico, October 18, 2017. REUTERS/Henry Romero

Gross domestic product in Latin America’s second-biggest economy contracted around 0.2 percent in seasonally adjusted terms during the July-September period compared with the previous quarter, the national statistics agency said.

That follows expansion of 0.6 percent in the second quarter. If confirmed, it would be the first quarterly contraction since the second quarter of 2013. Official third-quarter data will be released on Nov. 24.

Mexico was struck by two devastating earthquakes in September and was also hit by hurricanes. The head of the statistics agency, Julio Santaella, said on Twitter that economic activity had been affected by the quakes.

The government has said the cost of reconstruction from the quakes, which killed at least 471 people, will approach 48 billion pesos ($2.50 billion.

Central bank officials have said that after a dip in output, the economy should quickly bounce back as reconstruction efforts gain pace. The bank currently forecasts the economy will grow between 2.0 and 2.5 percent this year.

The preliminary data showed the industrial sector likely shrank by 0.5 percent in the July-September period versus the second quarter, while services slipped 0.1 percent. Agriculture expanded 0.5 percent quarter-on-quarter.

Compared with the same quarter a year earlier, the economy grew by about 1.6 percent in unadjusted terms, the agency said.

Before the string of natural disasters, Mexico’s economy had been more resilient than expected this year after U.S. President Donald Trump held off on threats to impose punitive tariffs on Mexican-made exports.

But the peso sank to a more than 7-month low last week, hurt by concerns that Trump may end up pulling out of the North American Free Trade Agreement (NAFTA). The currency briefly pared slight gains after the GDP data.

Reporting by Michael O’Boyle and Miguel Gutierrez; Editing by Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.

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