MexECON Blog

August Industrial Output Rises 0.5 Percent

Mexico's August industrial production rose by a seasonally-adjusted 0.5%, according to a report today from INEGI, the official statistics agency.  In addition, output in each of the previous five months was revised upward, with the July reading now also showing an increase of 0.5% and the June reading showing a decline of just 0.1%.  According to the report, the increase in output during August reflected a 2.9% advance in mining output, a 0.3% increase in construction activity, and a 0.2% rise in manufacturing production.  The only industrial sector to post a decline in August was utilities.  Mexico's overall industrial output has now risen in ten of the last twelve months, and production in August was up a very strong 8.1% from the same month one year earlier.  Even more impressive, Mexican manufacturing output in August was up 11.6% year-over-year.

Comment:  The rise in Mexico's industrial production during August was probably due, at least in part, to a recent reacceleration in the country's export growth.  Exports of manufactured goods to the United States have been strong over the last year or more, boosting production activity, prompting increased hiring, and bringing down the unemployment rate.  Even more impressive in August was the rise in Mexico's mining output.  The figures show non-petroleum output rose an astounding 9.5% from the previous month, for its strongest monthly gain since at least 2007.  Nevertheless, the Mexican economic recovery remains uncomfortably dependent on demand from the United States.  That is a problem because several factors point to slowing U.S. growth over the coming year.  U.S. inventory rebuilding is already starting to peter out, while the effect of fiscal stimulus is starting to wane.  In addition, U.S. consumers and businesses are still held back by a continued credit crunch, continuing efforts to reduce debt, lingering weakness in the housing sector, and uncertainty about future taxes and regulations.  Against this backdrop, Mexico's current economic rebound looks vulnerable to slowing or even stalling unless domestic consumption accelerates further and fixed investment starts to rise again.

Patrick Fearon, CFA
Vice President, Fund Management

                                    Mexican Industrial Production
                                  Seasonally Adjusted, 2003 = 100
                                                  Source:  INEGI
Industrial Output 1008

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