MexECON Blog

October Industrial Output Falls 0.9 Percent

Mexican industrial production fell by a seasonally-adjusted 0.9% in October, wiping out the revised increase of 0.6% in September.  It was also the second decline in the last three months.  According to the report, the fall in October stemmed entirely from a 0.9% drop in manufacturing output and a 1.2% decrease in construction.  October mining output was up 0.2%, and utility production rose 0.8%, but that was not enough to offset the declines in construction and manufacturing.  On an unadjusted basis, Mexico's overall industrial production in October was up 3.6% from the same month one year earlier.  The report was released today by INEGI, the official statistics agency.

Comment:  After downward revisions to several earlier months, today's report shows Mexican industrial production has now rolled over and may be starting a new downward trend.  Similarly, a report on Monday showed fixed investment flattened out in the third quarter, and today's data suggests it could show a decline when the October report is released.  These decreases are consistent with a report last week that showed Mexico's index of leading economic indicators is now pointing toward a potential recession in the coming months.  It appears that Mexico's strong economic expansion may finally be coming to an end.  I still believe the downturn could be arrested, especially because Mexico's purchasing managers' index for manufacturing rose to a record high in November, and because consumer confidence rose in both September and October.  A rebound would be especially likely if the European debt crisis remains quiet and U.S. politicians avoid the "fiscal cliff" of sharp tax hikes and spending cuts programmed for year's end.  Even if Mexico's economy does reaccelerate, however, it is important to remember that the country's current expansion phase is now quite mature.  Going forward, any renewed growth would likely be much more modest than earlier in the expansion.

Patrick Fearon, CFA
Vice President, Fund Management

                                         Mexican Industrial Production
                                         Seasonally Adjusted, 2003 = 100
                                                     Source:  INEGI
Industrial Output 1210

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