MexECON Blog

May Fixed Investment Rises 0.5 Percent

Gross fixed investment in Mexico rose by a seasonally-adjusted 0.5% in May, after a revised increase of 1.7% in April.  That marked the first back-to-back gains in investment since the turn of the year.  Moreover, investment figures were revised upward for each month going back to late 2010.  According to the report, from the official statistics agency INEGI, the rise in investment during May reflected modest gains in both equipment investment and new construction.  Equipment investment rose 0.3%, marking its third straight monthly increase.  Investment in new construction rose 0.6%, for its second monthly gain in a row.  On an unadjusted basis, total fixed investment in May was up a robust 9.1% from the same month one year earlier.

Comment:  Coupled with recent gains in manufacturing output and consumer confidence, the second straight rise in fixed investment suggests domestic demand in Mexico could have a bit more strength than previously thought.  Although Mexican exports are likely to soften in the face of the current slowdown in global economic growth, rising domestic demand could help cushion the blow to the economy.  Another implication is that the steep sell-off in the peso amidst the current global financial panic may well be overblown.

Patrick Fearon, CFA
Vice President, Fund Management

                             Gross Fixed Investment in Mexico
                               Seasonally Adjusted, 2003 = 100
                                             Source:  INEGI
Fixed Investment 1105

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