Mexico's Economic Growth Unexpectedly Accelerates
(Update4) By Jens Erik Gould Feb. 19 (Bloomberg) -- Mexico's economic growth unexpectedly accelerated in the fourth quarter, led by the transportation and communications industries. Gross domestic product, the broadest measure of a country's output of goods and services, expanded 3.8 percent from a year earlier, the finance ministry said today. The growth defied the predictions of most economists, who expected Mexico would be hurt by slowing demand from the U.S., its biggest trading partner. The government succeeded in its plan to boost domestic demand to compensate for a slump in exports, said Alfredo Coutino, senior economist for Latin America at Moody's Economy in West Chester, Pennsylvania. He predicts growth will continue to accelerate. ``This is going to be the first time in many years in which Mexico is going to move in the opposite direction as the U.S. business cycle,'' Coutino said in an interview. Mexico's economy expanded 3.3 percent in 2007 after three straight quarters of quickening growth to end the year. The fourth quarter's gains included a 10 percent jump in the transportation and communications sector and a 5.3 percent increase in financial services, real estate and insurance. Economists had estimated a 3.5 percent increase in fourth- quarter GDP, according to the median of 19 forecasts compiled by Bloomberg. Mexico's central bank had also said last week that expansion probably slowed in the fourth quarter because of less growth in consumer spending and exports. 2008 Forecast The central bank last month cut its economic growth forecast for 2008 by half a percentage point, to a range of 2.75 percent to 3.25 percent. Mexico's Finance Ministry expects the pace to slow to 2.8 percent this year. Most economists expect Mexico's economy to slow this year. Banco Santander in Mexico City estimates growth of 2.3 percent in the first quarter of 2008. Bear Stearns forecasts expansion will decelerate to 2.7 percent for all of 2008. Manufacturing output slowed in the fourth quarter, advancing 1.5 percent, compared with 1.8 percent in the third quarter. ``This generates some doubts about where the industrial sector is going,'' said Juan Trevino, chief economist for HSBC Holdings Plc in Mexico City. Coutino, who correctly predicted fourth-quarter growth would accelerate, expects expansion to stay stable or climb in 2008, finishing the year at 3.3 percent to 3.5 percent. Citigroup Inc.'s local unit said today that there is a greater consensus among economists that the central bank will cut its benchmark interest rate by half a percentage point in 2008. Ten of 22 economists made that predication in a survey, while 7 of 22 economists predicted the rate won't change. Banco de Mexico kept its rate unchanged at 7.5 percent last week for a fourth month as policy makers balanced concerns the economy was slowing with their forecast for inflation to exceed the bank's target this year. To contact the reporter on this story: Jens Erik Gould in Los Angeles at jgould9@bloomberg.net .