(Bloomberg) -- Mexico's economic activity unexpectedly contracted in August as the services sector sputtered, calling into question the strength of the nation's recovery.
Latin America's second-largest economy contracted 1.6% in August from the previous month, compared with analyst expectations for a 0.2% expansion. From a year ago, activity grew at a slower-than-forecast pace of 4.3%, the nation's statistics institute reported on Monday.
“This is bad news,” central bank deputy governor Jonathan Heath wrote in a Twitter post after the data was released. “It's primarily the result of a 2.5% decline in tertiary activities (commerce and services).”
Cases of Covid-19 in Mexico hit another high in August, before slowing in recent weeks. A 2.4% contraction in the agriculture sector also weighed on activity that month, while the industrial sector grew 0.4%.
“Services fell for a third consecutive month and accounted for most of the decline,” Felipe Hernandez, an economist at Bloomberg Economics, wrote in a research report. “Mining extended its downtrend in August, depressed by oil and gas. Output kept falling despite high commodity prices and increasing government transfers to the state-owned oil company.”
If August's slump continues into September, Mexico may see a 1.4% contraction in the third quarter, according to Bloomberg Economics.
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