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Mexican Economy Shrinks in Jan, Slowing Recovery
 Jason Lange - Reuters
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March 27, 2010
Mexico City - Mexico's economy contracted in January for the first time in five months, suggesting a slowdown in Mexico's recovery from recession and easing pressure on the central bank to raise interest rates.
Economic activity in January contracted by 0.83 percent from December, the national statistics agency said on Friday.
Mexico's economy had started growing around mid-2009, pulling out of its worst recession since the 1930s.
In recent weeks, Mexican officials and economists in the private sector have made increasingly optimistic economic growth forecasts, but Friday's data could throw cold water on those prospects.
"It's back to reality," said Santander economist Rafael Camarena. "The data tells us that the recovery is going to be very gradual."
The latest data takes some pressure off the central bank to raise interest rates despite rising inflation, Camarena said.
Most analysts think the bank will hike borrowing costs in the coming months, though Santander thinks policy makers will wait until at least the fourth quarter.
Both industry and services contracted in January from December.
In annual terms, the economy grew a lower-than-expected 2.36 percent in January from same month in 2009.
Analysts had forecast growth of 3.5 percent from a year earlier, according to a Reuters poll.
Mexico's economy shrank 6.5 percent last year, its worst contraction since 1932.
(Editing by Leslie Adler)
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