MexECON Blog

August Fixed Investment Rises 1.4 Percent

In a Wednesday report, Mexico's August fixed investment rose a seasonally-adjusted 1.4%, accelerating from a revised increase of 1.2% in July.  That marked the first back-to-back increases since the end of 2009 and the beginning of 2010.  According to the report, from the national statistics agency INEGI, the increase in August came primarily from a strong rise in machinery and equipment investment.  Construction of new facilities retreated.  On an unadjusted basis, the report showed investment in August was up 4.8% from the same month one year earlier, after a year-over-year gain of just 0.4% in July.

Comment:  The second straight monthly increase in investment during August is positive, but this series can be volatile, and it would take additional increases to know that Mexican investment is finally on the upswing again.  Investment in Mexico is being hindered by a range of problems, such as uncertainty about future demand, a continuing credit crunch, and rising drug violence.  The Mexican economy is currently in a strong rebound, but the rebound is heavily dependent on rising exports to the United States.  Mexico's recovery will not be on a truly firm foundation until exports, consumer spending, and investment are all growing at a healthy pace.

Patrick Fearon, CFA
Vice President, Fund Management

                             Gross Fixed Investment in Mexico
                               Seasonally Adjusted, 2003 = 100
                                             Source:  INEGI
Fixed Investment 1008

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