MexECON Blog

February Industrial Output Falls 0.4 Percent

Mexico's February industrial production fell a seasonally-adjusted 0.4%, after revised increases of 1.7% in January, 0.8% in December, and 0.7% in November.  According to the report, from the official statistics agency INEGI, the decline in output during February came mostly from a 1.4% drop in construction activity and a 0.4% decrease in mining output.  The key manufacturing sector posted no change in production, but utility output surged 2.3%.  On an unadjusted basis, overall output in February was up 5.2% from the same month one year earlier.

Comment:  The decline in industrial production in February is not too alarming.  The fall is consistent with other recent signs that the Mexican economy is moderating a bit after an unsustainable surge at the end of 2010.  In all likelihood, continuing strong growth in Mexican exports and improving expansion in domestic demand will keep the industrial sector growing.  Perhaps the main risk is that the surging peso could weigh on exports.  Foreign and domestic demand could also fall if global commodity prices continue to rise rapidly, or if another debt crisis in Europe saps confidence.  Finally, high levels of violence by Mexico's drug cartels could start to discourage domestic investment activity more noticeably.  In spite of these risks, however, the near-term outlook for Mexico's industrial sector remains bright.

Patrick Fearon, CFA
Vice President, Fund Management

                            Mexican Industrial Production
                           Seasonally Adjusted, 2003 = 100
                                           Source:  INEGI
Industrial Output 1102a

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