In a report released Thursday, Mexico's September industrial
production fell by a seasonally-adjusted 0.1%. However, that
erased only a small portion of the revised 0.4% gains in each of
the previous two months. According to the report, from the
official statistics agency INEGI, the decline in September came as
manufacturing production decreased 0.7% and mining output fell
0.3%. The only industrial sector to post an increase in
September was construction, where activity rose 1.5%. Despite
the decline in September, overall industrial production in Mexico
has risen in 10 of the last 13 months, and output in September was
up 6.3% from the same month one year earlier.
Comment: Rising exports continue
to boost Mexican industrial activity, but the gains are starting to
slow. After all, demand from north of the border is starting
to weaken as the effects of fiscal stimulus start to wane, U.S.
inventory rebuilding cools off, and U.S. consumers continue to
husband their resources and pay down debt. The main bright
spot in today's report was that Mexican construction activity rose
for a third straight month - a feat last seen in early 2008.
It is too early to say the increase in construction during late
summer is a sign that fixed investment is on the rise again,
especially after a report this week said fixed investment in
buildings decreased in August. Nevertheless, the recent
activity could be a sign that investment has at least stabilized
and is ready to start rising consistently in the near future.
If consumer spending accelerates further and investment does start
rising again, the Mexican economic recovery would be in a better
position to weather the expected softening in exports.
Patrick Fearon, CFA
Vice President, Fund Management
Mexican Industrial Production
Seasonally Adjusted, 2003 = 100