Saturday, August 22, 2009

Mexico suffers amid US recession

       Mexico's economy plunged 10.3% in the second quarter,its deepest contraction on record as withering exports forced factories to slash production and cut jobs.
       The year-on-year decline in gross domestic product reported by the national statistics agency on Thursday was the deepest decrease in quarterly GDP in records dating to 1981.
       With a downturn in the United States choking off demand for its manufacturing goods, Mexico is on track for its most severe recession since the 1930s. The economy is expected to shrink about 7% this year.
       "Exports have declined very sharply and we do not see yet a reaction to the slow improvement in economic activity in the United States," said Claudio Loser,president of the economic think-tank Centennial Group Latin America.
       Compared with the first quarter,Mexican GDP fell 1.12%, compounding a recession that has wiped out hundreds of thousands of manufacturing jobs.Some 80% of Mexican exports, including cars and televisions, go to the US.
       A severe bout of the H1N1 influenza virus made matters worse, hurting the country's key tourism industry and other services.
       "Things are really tough right now,"said Karla Grijalva,22, who was laid off from her job as a secretary six months ago and has yet to find work.
       To be sure, there have been some signs of recovery in both Mexico and America.
       In the United States, the battered housing sector is showing signs of bottoming out, and manufacturing surveys have been ticking steadily higher.
       In Mexico, industrial output is deteriorating at a less drastic clip and consumer sentiment has edged higher from a record low in May.
       A separate report released on Thursday showed the economy sank 8.08% in June from a year earlier, a more moderate decline than during the prior two months.
       "I expect Mexico's economy to stabilise by the fourth quarter and begin growing by next year, as long as the US economy doesn't fall off a cliff," said Benito Berber, economist for Latin America at RBS Greenwich.
       Still, some analysts believe Americans are undergoing a secular shift in their spending patterns, converting a once free-spending nation into one of savers - and boding poorly for a Mexican recovery.

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