MexECON Blog

December Fixed Investment Rises 1.8 Percent

Gross fixed investment in Mexico rose by a seasonally-adjusted 1.8% during December, matching the upwardly revised gain of 1.8% in November.  That marked the best back-to-back investment increases since mid-2010.  The big increases were driven mostly by investment in new machinery and equipment, which jumped 4.0% in January and 4.2% in November.  In contrast, December construction slumped 0.2%, erasing its gain of 0.2% in the previous month.  On an unadjusted basis, total fixed investment in December was up 6.6% from the same month one year earlier.  The report was released on Wednesday by INEGI, the official statistics agency.

Comment:  The rise in Mexican fixed investment in December provides added confirmation that the pullback in late 2011 was probably only temporary.  Moreover, investment in Mexico will probably continue to grow in the near term, driven by positive factors such as the rebounding U.S. economy and the increased competitiveness of Mexican manufacturers.  It is notable that fixed investment in Mexico is now even stronger than it was at its last cycle peak in mid-2008.  Nevertheless, there are risks.  If the European debt crisis worsens again, international capital flows could dry up, and businesses worldwide would likely lose the confidence to invest.  Moreover, rising consumer prices in Mexico could dent consumption spending.  Finally, the peso has been rebounding strongly in 2012, and if it continues to strengthen, it could turn into a headwind for Mexican exports, further discouraging investment.

Patrick Fearon, CFA
Vice President, Fund Management

                                      Gross Fixed Investment in Mexico
                                        Seasonally Adjusted, 2003 = 100
                                                        Source:  INEGI
Fixed Investment 1112

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