MexECON Blog

May Industrial Production Falls 0.9 Percent

Mexican industrial production declined by a seasonally-adjusted 0.9% in May, after revised increases of 0.5% in April and 1.4% in March.  The fall in May primarily reflected a 1.4% decrease in manufacturing output.  The decline in manufacturing was the first since February, and it was the worst since last August.  In addition, Mexican construction output fell 0.7% in May, and utility production decreased 0.2%.  Mining output bucked the trend by rising 0.5%, mostly because non-petroleum mining production rose strongly after a five-month string of declines.  On an unadjusted basis, overall industrial production in May was up 3.1% from the same month one year earlier.  The report was released today by INEGI, the official statistics agency.

Comment:  As I warned in my report on April industrial production last month, it now appears that Europe's debt crisis and slowing growth in the United States have started to weigh on Mexican industrial activity.  Early this year, industrial output had risen strongly on the back of reaccelerating exports, but the slowdown in output growth during April and the outright decline in May show that the problems from abroad have finally caught up with Mexico.  The country's increased competitiveness and continuing momentum in domestic demand suggest it has some cushion to absorb the global slowdown.  If global leaders are able to loosen policy and boost growth in time, Mexico's industrial sector may suffer nothing more than a transitory soft spot.  However, it is still to early to know if the situation will turn out that benign.

Patrick Fearon, CFA
Vice President, Fund Management

                                Mexican Industrial Production
                                Seasonally Adjusted, 2003 = 100
                                           Source:  INEGI
Industrial Output 1205

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