MexECON Blog

March Fixed Investment Jumps 1.2 Percent

Gross fixed investment in Mexico jumped 1.2% in March, after revised increases of 0.2% in February and 1.0% in January.  Mexican fixed investment has now risen for five straight months.  The last time investment rose so consistently was much earlier in the current expansion phase, during the opening months of 2010.  According to the report, from the official statistics agency INEGI, the rise in March stemmed entirely from a 2.8% surge in construction activity.  Investment in machinery and equipment was flat.  On an unadjusted basis, total fixed investment in March was up 6.9% from the same month one year earlier.

Comment:  The reacceleration in March suggests investment made a significant contribution to Mexico's economic growth in the first quarter.  Whether that is true or not will be known next week, when the government releases an updated estimate of first-quarter gross domestic product.  In any case, reaccelerating exports and an apparently improving external environment at the beginning of the year certainly helped encourage firms to take a chance on new facilities, machinery, and equipment.  The question now is whether that will continue in the coming months.  The European debt crisis has clearly worsened again, and there are signs the U.S. economy is fading.  On the other hand, officials in Europe, Asia, and the United States this week signaled they may be willing to take more significant steps to address their economies' problems or inject more stimulus.  The momentum in Mexico's economy is encouraging, but the country's growth trajectory is ultimately at the mercy of foreign developments.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Gross Fixed Investment in Mexico
                                           Seasonally Adjusted, 2003 = 100
                                                          Source:  INEGI
Fixed Investment 1203

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