On September 20, INEGI published the Global Supply and Demand for Goods and Services figures during the second quarter of 2019. Supply and demand fell by 0.2% in real terms compared to the first quarter of the year, and annual growth of 0.4%.
The Global Offering consists of Imports of Goods and Services and Gross Domestic Product; the first increased 0.1% in the second quarter compared to the first quarter of 2019, and grew 0.7% annually. Meanwhile, Gross Domestic Product remained unchanged from the previous quarter, and increased 0.3% in the annual comparison. So far this year, GDP has grown at an average rate of 0.2% per annum.
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On the Global Demand side, the components that increased in the quarterly comparison during the second quarter of the year were Exports of Goods and Services, which grew 3%, Private Consumption, which increased 0.2%, and Government Consumption, which grew 0.1%. In annual terms, Government Consumption decreased by 1.9%, Private grew by 0.6% and Exports grew 3.2% annually.
The component of Global Demand that declined in both annual and quarterly terms in the second quarter of the year was Investment, or Gross Fixed Capital Formation, which was reduced by 2.4% compared to the previous immediate quarter and 5.2% from 2018 quarter.
In the second quarter of the year, the annual drop of 5.2% in investment was the third in a row, and the steepest since the third quarter of 2013. In the period, investment as a percentage of GDP was 20.5%, a figure representing the lowest percentage since the third quarter of 2014, when investment as a percentage of GDP was 21.1%.
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In the last 10 years the level of investment as a percentage of the lowest GDP occurred in the second quarter of 2014, when it represented 20.4%, the current level is 0.1 percentage points from this figure. As the goal set by Mexico, how are we doing? in its investment #SemáforoEconómico is that it represents 24% of GDP, the traffic light is in yellow. The last time the goal was met was during the fourth quarter of 2008.
Total investment is made up of public and private sector investment. Public investment has had negative annual growth rates since the fourth quarter of 2018, and declined 11.5% in the second quarter of 2019; is the steepest decline since the second quarter of 2017. On the other hand, private investment declined in annual terms, also for the third consecutive time; the most recent fall in the most recent period was 4.0%, the steepest since the last quarter of 2013.
Private investment has a greater weight in GDP than public investment; in the second quarter of the year, private investment is equivalent to 18% of GDP, while public investment accounts for 2.5%. The maximum weight of public investment in GDP was observed in the fourth quarter of 2008, when it reached a ratio of 6.8% of GDP. For its part, private investment as a share of GDP peaked at an all-time high in the third quarter of 2015, when it reached 19.8%.
Public investment is relevant because it generates infrastructure and public works that aim to reduce production, transport and logistics costs in a way that improves the living conditions of Mexicans.
For its part, private investment provides opportunities for job creation and growth, as it allows to improve the quality of the products and promote technological development, generating competition and making the production processes more efficient.
It is essential that investment is of quality, that is, that both government and private seek to invest their capital in projects that, in addition to being profitable, improve the country’s productivity levels and boost economic growth. It is a priority for the current administration to provide a reliable environment that provides certainty for investment projects and attracts investors, so that investment, both private and public and both domestic and foreign, increases.
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