Mexican economy bounces in October, but challenges remain ahead

MEXICO CITY, Dec 22 (Reuters) - Mexico's economy expanded in October, rebounding from a contraction the previous month, the national statistics agency said on Monday, but prospects remain challenging.

Latin America's second largest economy grew 1% in October compared with a revised decline of 0.4% the prior month. The rise exceeded a 0.5% increase forecast by a Reuters of analysts.

The month-on-month growth was mainly driven by a 1.4% increase in the primary sector and a 1.2% rise in the labor-intensive tertiary sector. The secondary sector, including construction and manufacturing, recorded a more modest increase of 0.7%.

Compared to the same month last year, Mexico's economy grew 1.7% in October, INEGI statistics agency added in a report.

"Going forward, activity is expected to face headwinds from soft business confidence, softening formal labor market, and peaking credit cycle," said Alberto Ramos, chief Latin America economist at Goldman Sachs.

Mexico's central bank, also known as Banxico, has also flagged concerns over global trade tensions and sluggish economic growth in its latest monetary policy decisions.