MexECON Blog

June Industrial Output Falls 0.4 Percent

Mexico's June industrial production was down a seasonally-adjusted 0.4%, essentially erasing the revised gain of 0.4% in May.  Prior to that, output had risen 0.1% in April and 1.0% in both March and February.  According to the report, from the official statistics agency INEGI, Mexico's utility output was up modestly in June, but manufacturing output fell 0.1%, mining output was down 1.2%, and construction activity declined 1.4%.  Nevertheless, the decline in overall production during June was the first substantial pullback since mid-2009.  In unadjusted terms, output in June was still up a robust 8.4% from the same month one year earlier, matching the year-over-year increase in May.  Manufacturing output in June was up 15.2% from the same month one year earlier, marking its strongest year-over-year increase since at least 2007.

Comment:  The slight decline in factory output during June could be connected to the recent slowdown in Mexican export growth.  However, factory activity is often volatile, and it may take a few more months to see just how much slowing exports will weigh on the country's manufacturing sector.  If the factory sector slows too much, hiring could soften and the rebound in other economic sectors could be further delayed.  Already, the main economic risk for Mexico is that the export and industrial side of the economy could stall out before consumer demand, investment, housing, and government activity strengthen enough to carry on the economic recovery.  Mexico's economic recovery still looks more likely to continue than to peter out, but there are significant downside risks.

Patrick Fearon, CFA
Vice President, Fund Management

                               Mexican Industrial Production
                              Seasonally Adjusted, 2003=100
                                            Source:  INEGI
Industrial Output 1006

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