BANXICO: Financing to non-bank sector +6.8% y/y in real terms through Mar 11 to MXN4.2tln; bank loans +9.9% to MXN57.4bln; mortgages +5.5%

BANXICO: As of Apr. 11, M1 +12.1% year on year to MXN1.744bln; M4 +10.1% to MXN8.294b;m

BANXICO: Monetary base -MXN699mln to MXN636.918bln (-9.9% y/y); central bank says YTD tendency "normal"

BANXICO: Foreign reserves +US$1.284bln from May 23-27 to US$127.982bln

INEGI: Manufacturing: Employment +0.8% in Mar v Feb on seas adj basis (biggest monthly gain in one year); work-hours +0.51% in Mar v Feb

INEGI: Construction: Production Index +0.4% in Mar v Feb in seas adj terms; construction employment -1.29% v Feb; work-hours +1.76%

Front Page Financiero: Battle Over IMF Heats Up - Dispute between France and Mexico for IMF leadership just got noisier

Front Page Milenio: Anti-Drug Strategies Tweaked: Poire - Los Pinos security official Alejandro Poire says govt has responded to public

Front Page Universal: UN Worried On Migrant Abuse - Human Rts Commissioner Navi Pillay says immigrations face grave situation in Mexico

Front Page Reforma: Extortion Slams Neza - Organized crime rackets in Mexico City zone has forced many small businesses to close down

Front Page Economista: Record GDP Per Capita In Q1 - US$9,985 per person represents 15% hike from US$8,649 in Q110

Front Page Universal: Cordero Divides PAN - FinMin's announcement of presidential aspirations causes friction in ruling party

Front Page Milenio: Army Heads To San Luis Potosi, Apatzingan; Leave Nuevo Leon - Last Monday a firefight in Tierra Caliente lasted 48hrs

Front Page Reforma: Eruviel Ávila Offers Cars For Vote - PRI candidate for State of Mexico governorship offers autos, public offices 4 votes

Front Page Economista: Bad Branding Hurts Growth - Executive Council of Global Companies, says Mexican reality better than internat'l image

Front Page Financiero: Tax Collection +20% in 4yrs - 2007, 2009 tax reforms have contributed to rise in revenue

Front Page Excelsior: Terror In Nuevo Leon Casinos - In downtown Monterrey at top of biz hours armed men stormed in for robberies

Front Page Milenio: Teachers Blockade, March In Fed Dist - Oaxaca chapter of educators union broke off dialog, stepped up protests

Front Page Universal: Support Block For Cordero Forms In PAN - 134 party members rally behind FinMin as presidential candidate for 2012

Front Page Reforma: Michoacan Unifies PRI-PRD-PAN - Parties agree to explore unity candidate in coalition for gubernatorial race

Balance of Payments Q1: Current acct +$1.4bln, 0.5% of GDP, v. Q4 surplus of $436mln, -0.2% of GDP

INEGI: Trade: Seasonally adjusted exports -1.15% m/m to $28.7bln, biggest drop in 11mo

INEGI: TRADE: Apr exports $28.0bln +12.6% y/y, non-petroleum $23.4bln +9.0%; Apr imports $27.2bln +9.8%; non-petroleum $23.7bln +7.4%

Front Page Economista: Slim Increases Stake In Spanish Bank - Carlos Slim bought additional 4.7mln shares in CaixaCorp

Front Page Financiero: Euro Domination Of IMF Opposed - Mexico's complaint backed by BRIC, Russia, S Africa; merit-based system requested

Front Page Jornada: Garcia Luna Offered US Full Access To Intel - Public Security Minister Garcia Luna gave carte blanche to US's Chertoff

Front Page Universal: State Congresses Opaque - Do not meet min transparency requirements; Tlaxcala, Chiapas, Baja California Sur, Queretaro

Front Page Milenio: Gurria To Support France, Not Carstens - Mexican OECD head Jose Gurria will back French IMF replacement, not Mexico's

Front Page Reforma: Ruiz Admin Treasurer Untouchable - Some family jailed for money laundering, but Oaxaca ex-Treasurer Miguel Ortega free

INEGI: Wholesale Sales Index: Seasonally adjusted index -26.2% annualized in Mar. v. -3.2% in Feb; YTD Inegi Wholesale Index -3.9%

INEGI: RETAIL INDEX: Seasonally adjusted index -3.0% annualized in Mar. v. +3.1% in Feb; YTD Inegi Retail Index -1.3%

Front Page Financiero: Carstens Launched To Lead IMF - Mexico proposes central banker as new managing director of IMF

Front Page Universal: Mexico Proposes Carstens To Lead IMF - Bank of Mexico Gov. Agustín Carstens, is former finance minister, IMF director

Front Page Milenio: Public Security Ministry has 30% backlog in evaluation of personnel; in contrast FinMin has finished 97% of employees

Front Page Reforma: Crime Hits Natural Gas - Cartel violence in Nuevo Leon, Tamaulipas, Coahuila has reduced natural gas output 14.7%

Q1 Results Point To End Of Rebound Bounce

This story was originally published at Plaza de Armas.

Mexico’s official statistics clearing house, INEGI, released first-quarter gross domestic product results last week, and they undermined a prevailing sense of optimism that had led economists and central bankers to ratchet up predictions recently.

Unexpectedly weak Q1 figures showed that the inertia that had initially carried over from the 2010 rebound likely has tapered off; the Bank of Mexico’s most recent survey of private economists showed the consensus 2011 GDP forecast climbing from 4.3 percent in March to 4.4 percent in April.

But the new data suggest a more sluggish year.

GDP expanded a meager 2.1 percent in the January-to-March period on a seasonally adjusted, quarter-to-quarter, annualized rate. That compares with 4.6 percent in Q410, and marks the slowest economic advance in a year.

Even more ominous, the Global Economic Indicator (IGAE), a monthly GDP proxy, actually dropped 3 percent in March. It marked a screeching reversal. Over the previous five months, the IGAE had averaged a vigorous expansion of 5.5 percent.

The government downplayed the lackluster result. “Our prognostic is maintained [at 4.3 percent for full-year 2011],” Finance Minister Ernesto Cordero told a press conference. “We see economic performance this year with optimism.”

The government blamed the farm sector for the bleak result, as northern crops were raked by winter freezes that crippled harvests and obliged the feds to dispatch emergency reseeding funds. Indeed, agricultural GDP, volatile by nature, shriveled 9 percent in the first quarter, seasonally adjusted. This is the “freak weather put the frostbite on our numbers” explanation. Farming and fishing accounts for a slim 4-percent sliver of gross economic output, so even though erratic numbers can sway overall results, they won’t hinder performance over a longer horizon. Message: Don’t worry, growth will return along with new seedlings.

But the horizon still looks cloudy to us. Crop woes aside, the services and industrial sectors both lost steam: ticking up 3.8 percent and 2.6 percent, respectively, versus 4.7 percent and 4.3 percent in Q410.

Overseas, Mexico's external cylinders are sputtering. The Japanese Tohoku quake has disrupted manufacturing supply chains and Asian consumer demand. European nations are trembling under debt defaults and restructuring negotiations. Geopolitical turbulence in the Middle Eastern and North Africa region is weighing on U.S. consumer spending as gasoline prices press higher. In particular, U.S. car sales, the great rebound motor for the Mexican economy in 2010, essentially ground to a halt in recent weeks.

Domestically, internal Mexican growth has been billed as the workhorse poised to pick up demand slack in the face of these external threats. Supporters of this position point to the 9.7-percent and 5.6-percent surges in the retail and financial sectors in the first quarter.

But the resilience of consumer demand in the Mexican economy is actually rather tenuous. For example, one often-overlooked indicator is the recreational and sports services industries, a prime peephole through which to peer into consumer discretionary liquidity. This economic division fell 0.6 percent in the first quarter. Moving into the second quarter, the INEGI April Consumer Confidence Index plunged 2.8 percent in April, stringing together a two-month decline with March and achieving the biggest drop since mid-2009.

As another example, the INEGI Open Unemployment Rate fell from 5.5 percent to 5.2 percent from the last quarter of 2010 to the first quarter of this year, painting a picture of greater hiring by private companies. But that figure only means that more Mexicans actively seeking work were able to find at least one hour of labor (paid or unpaid) in the week prior to the government survey. Drilling deeper into the data, we find the proportion of poor-quality informal employment rose from 27.2 percent to 28.5 percent of the workforce in that time frame.

So GDP forecasts may drift back down in coming months. Then again, even the “optimistic” projection of 4.3 percent by the Finance Ministry is hardly cause to celebrate. Unless Mexico sustains GDP growth rates of 5 percent or more per year, it will remain unable to create enough formal private sector jobs to absorb new workers, improve real wages, raise government services, and generally improve the welfare of the population.

Our bet is that in six months the pundit pack will be looking back at these Q1 data with chagrin. Now that the technical growth rebound from the severe 2007-2009 recession has faded, it looks like the Mexican economy is slipping back into its sub-par 3.0-percent-to-3.5-percent growth band.

Front Page Financiero: Gasoline Subsidy to Rise - Finance Ministry says govt will pay MXN170bln in subsidies as global gasoline prices rise

Front Page Excelsior: Police Linked To Slaughter - Calderon charges that local cops hauled victims to San Fernando killing fields

Front Page Universal: Federal Attorney General's Office warns organized crime could seek to influence 2012 presidential elections

Front Page Milenio: 16 Ministers Uncertified - Only 8 cabinet heads have completed polygraph, psychological, drug tests

Front Page Reforma: ISSSTE Faces Med Shortage - Failure to pay distributors could worsen depleted pharmo stocks at public health care

Front Page Economista: OECD Recommendations Disdained - Govt has ignored 4 of 9 OECD prescriptions since 2009

Front Page Financiero: WB: Mexico Lags Growth - Emerging economies to fuel global activity, but Mexican economy will lag in next few years

Front Page Universal: OECD Attacks Monopolies - Organization lists numerous sectors with weak or no competition, hurts economy, consumer

Front Page Milenio: Two Trailers, 513 Indocumentes - Immmigration found two semis at souther border packed with Latin Americans and Asians

Front Page Reforma: PGR Accused Of Fabricating Guilt - Lawyer for one of alleged murderers of ICE Agent Zapata affirms client's innocence

Front Page Economista: Labor Reform Remains Possible - PRI, PAN, PRD say that a reform passage in an extraordinary leg session possible

Front Page Financiero: Builders Flee Chihuahua - More than 200 construction firms in Cd Juarez have left for U.S. or other cities in last yr

Front Page Universal: Immigration Chief Downplays 'Anomalies' - Rogue agents represent scant exceptions to agency's officers, says

Front Page Milenio: Edomex candidate Encinas Huddles w/Cardenas, AMLO - Ex-pres-candidates, Ebrad and Zambrano join together in act of unity

Front Page Reforma: Narcos Extort Developers - Organized crime is charging builders "right-of-way" fees, Construction Industry says.

PDA: Looking at immigration with tunnel vision -- http://ping.fm/LNeZ2

INEGI: IMMEX: Headcount at IMMEX maquila and export employers up 7.4% y/y in Feb, v. +8.2% in Jan, +10.0% in Dec; total 1.8mln employed

Front Page Economista: SCT Will Issue Telmex Bulletproof Ruling - Communications Ministry lawyers preparing to modify Telmex concession

Front Page Excelsior: Elba Accepts Evaluation - President of National Educator Union agrees to permit system to evaluate public teachers

Front Page Universal: FCH: Major Reforms In Education Coming - President Calderon pledges huge changes to teaching profession

Front Page Milenio: AMLO to Moreira: PRI, PAN The Same Mafia - Lopez Obrador rejects electoral alliance, blames both for current crisis

Front Page Reforma: Microcredits Costly - While in Mexico microfinancers charge 74% or more, in Brazil and Peru the average is 28.6%

Milenio: Calderon, If We Legalize, Criminal's Paradise - Medical marijuana in U.S. has hurt Mexico's crime-fighting, prez says

Front Page Financiero: Vigorous Growth: Carstens - The Bank of Mexico raised its GDP projection to an upper end of 5% from 4.8% previously

Front Page Excelsior: Calderon Urges Consistency From US - If state-by-state relaxation of drug laws continues, Mex 2b criminal's paradise

Front Page Economista: Telmex May Offer Audio, Video - Communications Ministry has 15 days to rule on a modification of telephone concession

Front Page Reforma: Teacher Rolls Manipulated - State govts manipulate teacher rolls, fail to make educator payroll transparent: NGO

BANXICO: Inflation: Core consumer price index, stripping out volatile prices such as farm produce, fell to 3.18% in Apr from 3.21% in Mar

BANXICO: Inflation: Consumer price index rises to 3.36% in Apr from 3.04% in Mar; central bank says spikes in fresh farm caused increase

Front Page Universal: Parties Urged To Cut Ties To Organized Crime - Natl March 4 Peace leaders insist parties purge corrupt officials

Front Page Milenio: Sicilia Challenges Calderon To Cut Garcia Luna - Protesters present list of demands to government

Front Page Reforma: Calls For Garcia Luna To Resign - Protest leader demanded Security Minister resign in speech following mass peace march

FEATURE: Colonias caught in budgetary blind spot -- Budget austerity threatens assistance for Texas favela. http://ping.fm/LBySZ

PAN unveils 7 pre-candidates most likely to represent the party on the presidential ticket for the July 2012 elections: http://ping.fm/8PtrF

Front Page Economista: Customs Drug-Trafficking Controls Strengthened - New rules require logistics companies to monitor for narcotics

Front Page Financiero: Peso Appreciates 7% In 4mos. - Currency strengthens 1% in last week alone, opens today at MXN11.53/US$

Front Page Universal: PAN 2012 Presidential Hopefuls - S. Creel, H. Félix, E. González, A. Lujambio, J. Lozano, J. Vázquez Mota, E. Cordero

Front Page Universal: PAN Defines 2012 Hopefuls - Natl Exec Committee of PAN named the 7 pre-candidates for 2012 pres elections (cont)

Front Page Milenio: PAN Dogpiles Peña Nieto - 7 PAN presidential hopefuls bash likely PRI candidate, outgoing Edomex Gov. Enrique Peña Nieto

Front Page Reforma: Pensions Sheared - Lacking incentives for Afore retirement plans to reduce commissions, fund growth may slow