MexECON Blog

October Fixed Investment Falls 0.9 Percent

Gross fixed investment in Mexico fell by a seasonally-adjusted 0.9% in October, after a revised flat performance in September and a 0.2% decline in August.  The decline in October came in part from a 0.8% fall in construction activity.  The pullback in construction erased only part of its 3.0% rise in September, but it was still the worst decline since September 2009.  Just as important, October investment in machinery and equipment dropped 2.1%, after a 3.9% decline in September and smaller declines in each of the two months before that.  On an unadjusted basis, total fixed investment in October was up just 4.9% from the same month one year earlier.  Today's report was issued by INEGI, the official statistics agency.

Comment:  The Mexican economy still appears to have momentum, but the recent weakness in investment should be seen as a yellow flag.  Undoubtedly, businesses have become more cautious since late summer, when the European debt crisis intensified again and global growth prospects seemed to worsen.  Firms may continue to pull back on investment until there is more clarity on future prospects.  Fortunately, that clarity could come soon.  Incoming data suggest U.S. economic activity is firming again.  Increased hiring in the United States is a particularly encouraging sign.  If the United States and the rest of North America can continue to decouple from the problems in Europe and Asia, investment in Mexico is likely to bottom and start rising again.

Patrick Fearon, CFA
Vice President, Fund Management

                                     Gross Fixed Investment in Mexico
                                       Seasonally Adjusted, 2003 = 100
                                                        Source:  INEGI
Fixed Investment 1110

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