MexECON Blog

August Industrial Production Falls 0.8 Percent

Industrial production in Mexico fell by a seasonally-adjusted 0.8% during August, after a rise of 0.5% in July and a revised increase of 1.3% in June.  According to the report, Mexican construction output plunged 1.9% in August, after two straight months of robust increases.  Just as important, manufacturing production was down 0.9%, also after two months of gains.  Utility production was down 0.8%, while mining output was up 0.4%.  On an unadjusted basis, Mexico's overall industrial production in August was up 3.6% from the same month one year earlier.  The report was released today by INEGI, the official statistics agency.

Comment:  The decline in Mexican industrial output during August was only the third monthly decrease this year.  Driven by rising exports and good momentum in domestic demand, industrial activity has clearly been on an uptrend, so the fall in August is not too alarming by itself.  However, the Mexican economy is facing mounting risks.  If the European debt crisis continues to weigh on global economic growth, or if U.S. policymakers allow fiscal policy to tighten too much at year's end, Mexican exports could eventually stall out or even reverse.  Now, accelerating inflation in Mexico also holds the potential to dampen consumer demand.  Mexico's industrial sector is still growing, as indicated by the strong rebound in the September purchasing managers index for manufacturing, but the growth rate could well soften in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

                                        Mexican Industrial Production
                                        Seasonally Adjusted, 2003 = 100
                                                   Source:  INEGI
Industrial Output 1208

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