MexECON Blog

November Industrial Production Rises 0.9 Percent

Mexican industrial production rose by a seasonally-adjusted 0.9% in November, just erasing its 0.9% decrease in October.  Prior to that, revised figures show output rose 0.7% in September, after falling 0.8% in August.  According to the report, the rise in November came in large part from the key manufacturing sector.  Production in that sector climbed 1.1%, after a 1.0% decrease in the prior month.  Mining production jumped 3.4%, driven by an unusually large surge in petroleum and natural gas extraction.  In contrast, utility output edged down 0.3%, and construction output dropped 1.4%, for its third decline in the last four months.  On an unadjusted basis, Mexico's overall industrial production in November was up 2.8% from the same month one year earlier.  The report was released on Friday by INEGI, the official statistics agency.

Comment:  Mexican industrial production has started to trend slightly downward in recent months, and its rise in November has not changed that.  In fact, output looks set to continue sliding gradually in the near term, given developments elsewhere in the economy.  Mexico's exports began to soften last summer, fixed investment has flattened out, and unemployment has edged up.  The country's index of leading economic indicators even points to a potential recession in the coming months.  Fortunately, other indicators suggest the manufacturing sector may be stronger than implied by the industrial production report, and lower inflation has boosted consumer sentiment, setting the stage for continued strong consumption spending.  In the United States, politicians have also averted some of the sharp tax hikes that were previously scheduled for January 1, and that could reignite demand for Mexican exports.  Nevertheless, even if industrial activity stabilizes or starts to rise again, the Mexican economy appears to be entering a period of more middling growth and greater risk.

Patrick Fearon, CFA
Vice President, Fund Management

                                              Mexican Industrial Production
                                            Seasonally Adjusted, 2003 = 100
                                                          Source:  INEGI
Industrial Output 1211

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