The Q4 preliminary real GDP growth estimate came in at +0.3% q/q (+1.9% y/y), slowing down from the +0.8% q/q in Q3. It takes the annual 2018 figure to +2%, a slight deceleration from 2017 (+2.1%) and a little below our expectations. While services (accounting for 63% of GDP) were the main driver of growth, adding +0.5pp to the overall q/q figure, industry subtracted -0.3pp. The demand breakdown of GDP figures is not available yet, but it appears likely that private investment lagged behind. Indeed, the capacity utilization rate has fallen to its lowest level since early 2017 while business confidence returned to pre-election lows due to AMLO’s policy fluctuations. The additional monetary tightening (an interest rate hike to 8.25%) resulting from heightened domestic risks could also continue to hinder activity. We start 2019 with the same carry-over as in 2018 (+0.6%). Private investment is likely to disappoint, and companies will also be affected by the slowdown in both U.S. growth and global trade.
