Mexican economy shrinks in third quarter, driven by manufacturing decline

By Aida Pelaez-Fernandez

MEXICO CITY, Nov 21 (Reuters) - Mexico's economy shrank by 0.3% in the third quarter, data from the national statistics agency INEGI showed on Friday, fueling concerns over Latin America's second-largest economy. The country's economy continued to show weakness in the July to September period, contributing to lower inflation and allowing interest rate cuts, but prompting concerns about the strength of its secondary sector and local currency.

The GDP data was in line with INEGI's preliminary estimate last month and forecasts from economists in a Reuters poll, both of which pointed to a 0.3% contraction from the previous quarter.

Mexico's weak GDP data for the third quarter, together with the dollar's upward momentum, undermined the Mexican peso, analysts at brokerage Monex said in a note. The national currency sank 0.4% in early trading on Friday.

The secondary sector, which includes manufacturing and construction, was the biggest contributor to the decline in the third quarter, contracting by 1.5%.

Primary activities, which include farming, fishing and mining, performed strongly with 3.5% growth in the period.

President Claudia Sheinbaum defended her government's economic model on Friday, which she said was "working." "Mexico's economy is solid, it's strong," Sheinbaum said at her morning press conference, adding that GDP was just one economic indicator to measure success against. GDP "has its problems," Sheinbaum said, arguing that it failed to measure how many people had been lifted out of poverty or had accessed education.

In annual terms, the economy contracted by 0.1%, compared with expectations of a 0.2% downturn. In a separate statement, INEGI reported that Mexico's economy shrank 0.6% in September from August, but expanded 0.7% when compared with September 2024.

(Reporting by Aida Pelaez-Fernandez and Ricardo Figueroa Editing by David Goodman, Kirsten Donovan)