Mexico’s GDP contracts for the first time in three years

Mexico’s GDP contracts for the first time in three years

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Mexico's economy contracted 0.2 percent in the second quarter from the prior three months, less than calculated last month, as growth in the services industry slowed and exports fell.

Gross domestic product shrank 0.2 percent, according to a report from the national statistics institute, the first drop in three years. Preliminary figures on July 29 had shown a 0.3 percent decline. From the previous year, GDP climbed 2.5 percent, compared with the 2.4 percent median estimate of economists surveyed by Bloomberg.

Mexico has been hit by a slump in exports to the U.S., as well as falling oil prices and production that forced the government to cut spending. Adding to the problem is a slower expansion in domestic demand that had been the main source of growth for previous quarters in Latin America's second-largest economy.

The peso fell 0.4 percent to 18.2891 per dollar at 8:05 a.m. in Mexico City. The currency has weakened 5.6 percent this year through last week after the Federal Reserve raised its key rate in December, plunging oil prices reduced the revenue available to fund government outlays and global risks increased.

Growth from a year earlier was led by farming output, which climbed 3.8 percent, while services expanded 3.2 percent. Industrial activity grew 1.0 percent.