MexECON Blog

July Industrial Production Rises 0.5 Percent

In a report yesterday, Mexico's July industrial production rose by a seasonally-adjusted 0.5%, essentially erasing the revised decline of 0.5% in June.  The rebound in July stemmed mostly from a 1.2% jump in manufacturing output, which not only erased its 0.6% decline in the previous month, but also marked the best rise in factory production since January.  In addition, construction was up 0.7%, for its fourth straight monthly increase.  In contrast, utility production was down 0.4% in July, while mining output was down 1.3%.  On an unadjusted basis, overall output in July was up 3.2% from the same month one year earlier.

Comment:  Mexican industrial output has now risen for three of the last four months, providing further evidence that the back-to-back declines in February and March were only a temporary soft spot.  The growth in Mexico's industrial production is understandable because the country's exports continue to rise, though at a slower pace than earlier in the current rebound, and domestic demand is still growing.  Nevertheless, the worsening economic slowdown in the developed countries is likely to weigh ever more heavily on Mexico's exports.  Sales abroad are likely to continue slowing, while domestic demand is probably set to cool as well.  Industrial production in Mexico will probably keep growing in the near term, but the rate of increase is likely to moderate, and activity could become much choppier.  Risks are to the downside.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Mexican Industrial Production
                                        Seasonally Adjusted, 2003 = 100
                                                      Source:  INEGI
Industrial Output 1107

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