MexECON Blog

June Industrial Production Jumps 1.3 Percent

Mexican industrial production jumped a seasonally-adjusted 1.3% in June, erasing its revised 0.7% decline in May and marking the biggest increase in output since last September.  The rebound in June came mostly from strong increases in manufacturing and construction.  Manufacturing output surged 1.6%, erasing its 0.9% decline in the previous month and marking its best rise since last autumn.  Construction activity jumped 1.5%, after a fall of 0.6% in the previous month.  Mining output eked out a 0.1% gain in June, though that was slower than its 0.5% increase in May.  In contrast, Mexican utility output dropped 0.3% for a second straight month in June.  On an unadjusted basis, overall production in June was up 3.7% from the same month one year earlier.  The report was released today by INEGI, the official statistics agency.

Comment:  The latest worsening of the European debt crisis and slowing economic growth in the United States gave a chill to Mexican activity during late spring, but recent data suggest the impact may have been limited.  For example, Mexico's exports continued to fall in June, but imports fell even faster.  That suggests the weak peso may be encouraging greater reliance on domestic production.  In addition, Mexico's unemployment rate held steady in June, and consumer optimism jumped in July, suggesting no significant deterioration in the labor market.  Nevertheless, Mexico's near-term economic performance hangs in the balance.  If the situation in Europe gets substantially worse or U.S. activity continues to slow, global confidence is likely to suffer and Mexico would likely see continued export declines and a return to softer industrial activity.  If the situation abroad does not get much worse or even stabilizes or improves, Mexico is likely to keep growing well for a while yet, largely on the back of its increased competitiveness and good momentum in domestic demand.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Mexican Industrial Production
                                         Seasonally Adjusted, 2003 = 100
                                                    Source:  INEGI
Industrial Output 1206

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