UPDATE 2-Mexican economy grows in April but pace cools

Tue Jun 26, 2012 7:53pm IST

* Economy grows 0.34 pct vs March, poll saw 0.31 pct

* Growth at 4.68 pct vs April 2011, poll saw 4.22 pct

MEXICO CITY, June 26 (Reuters) - Mexico's economy cooled in April compared to March amid a global slowdown but continued growth backs expectations that policymakers will leave interest rates on hold this year.

Mexico's economy grew 0.34 percent in April from March , the national statistics agency said on Tuesday. That was just above a 0.31 percent expected in a Reuters poll but slower than the 1.94 percent expansion seen in March, which was revised down from a 1.96 percent pace initially reported.

The country's services sector grew 0.73 percent in April over March, industry grew 0.65 percent while agricultural activity fell 3.44 percent.

Slowing job growth in the United States could crimp the demand for Mexican exports going forward, but Mexico's central bank chief said last week the economy could still grow nearly 4 percent this year if the U.S. growth holds up.

Policymakers are seen holding the country's benchmark rate steady at 4.50 percent into 2014.

"The solid expansion of the real business cycle reduces the need for near-term monetary stimulus," Goldman Sachs economist Alberto Ramos said in a note to clients.

"However, the recent sluggish performance of the U.S. economy and unsettled global backdrop may lead to some moderation of domestic and external demand in the months ahead," he said.

Mexico's annual inflation rate in early June hit a 1-1/2 year high and policymakers are concerned that consumer prices could be pushed higher due to a sharp slump in the peso. ,

The currency recently hit a three-year low due to rising fears that Europe's debt troubles could drag further on slowing global growth.

Still, Ramos said the risks to the global economy made an interest rate cut more likely down the road than a rate hike.

The economy expanded 4.68 percent from April of 2011, faster than the 4.22 percent expected in a Reuters poll and compared to a downwardly revised 3.47 annual rate in March from the 3.59 percent rate first reported.