MexECON Blog

February Fixed Investment Falls 0.3 Percent

In a new report from INEGI, the official statistics agency, Mexico's February gross fixed investment fell a seasonally-adjusted 0.3%.  However, that reversed only a small part of the 2.2% gain in January and the 1.0% gain in December.  It was also only the second decline in the last eight months.  According to the report, the pullback in February reflected declines in both construction activity and machinery and equipment investment.  On an unadjusted basis, total fixed investment in February was up 8.1% from the same month one year earlier.

Comment:  Fixed investment continues to rebound in Mexico, with the gains now broadly based across categories.  The increase in investment is important because it complements the budding recovery in domestic consumption and the continuing boom in Mexican exports.  Nevertheless, investment will need to accelerate further to make a more substantial contribution to Mexican economic growth.  In the longer term, investment in Mexico will need to rise much further for a sustained period in order to keep the country's economy growing at a robust rate.  Since 2003, fixed investment in Mexico has averaged 20.6% of gross domestic product (GDP).  While that is substantially higher than the U.S. rate of 15.2% in the same period, it is only slightly ahead of the average for all countries.  Moreover, a developing country such as Mexico needs to channel capital to its citizens much more rapidly in order to truly boost growth and raise living standards.  In countries such as China, India, Singapore, and Vietnam, for example, investment in recent years has often been more than 40% of GDP.

Patrick Fearon, CFA
Vice President, Fund Management

                           Gross Fixed Investment in Mexico
                            Seasonally Adjusted, 2003 = 100
                                            Source:  INEGI
Fixed Investment 1102

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