MexECON Blog

October Industrial Production Falls 0.5 Percent

Mexico's October industrial production fell by a seasonally-adjusted 0.5%, after a revised increase of 1.3% in September.  In manufacturing, output fell 0.4% in October, following a 1.4% increase in the prior month.  Construction output slumped 2.5%, but that came after a strong 3.5% gain previously.  Utility production fell modestly for a second straight month, marking its first back-to-back declines since the beginning of 2010.  The only industrial subsector to rise in October was mining, where output was up marginally after six straight months of declines.  On an unadjusted basis, overall production in October was up 3.3% from the same month one year earlier.  The report was released by INEGI, the official statistics agency.

Comment:  Amidst the global financial panic and sharp slowdown in European and Asian economic activity during late summer, it is impressive that Mexican industrial production rose in September and only gave up some of its ground in October.  As I've discussed previously, recent data from the United States, Canada, and Mexico has been relatively good, suggesting the North American region has partially decoupled from the economic problems abroad, at least for the time being.  The sharp drop in the value of the peso since the summer has probably given further support to Mexican exports and industrial activity.  Going forward, monetary and fiscal policy could also be loosened in the run-up to Mexico's 2012 presidential elections.  In sum, Mexican economic risks remain weighted to the downside, but there is also a decent possibility the country's performance could come in better than expected in the coming months and quarters.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Mexican Industrial Production
                                        Seasonally Adjusted, 2003 = 100
                                                      Source:  INEGI
Industrial Output 1110

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