MexECON Blog

August Industrial Production Rises 0.5 Percent

Mexican industrial production rose by a seasonally-adjusted 0.5% during August, marking a significant improvement over the revised increases of 0.2% in July, 0.2% in June and 0.3% in May.  Manufacturing, construction, and utilities all posted production increases of at least 0.4% during August, while mining output rose 0.3%.  Perhaps most notable, the rise in construction output was the first since May, and it was the strongest since February.  Within that industry, public works construction slumped in August by 3.7%, erasing its 3.0% gain in the previous month, but the erection of new buildings rose 1.8%, and output in the building trades gained 2.1%.

On an unadjusted basis, overall industrial production in August was down 0.7% from the same month one year earlier.  Utility output was up 1.7% year-over-year, and manufacturing output was up 1.6%.  However, mining production was down 2.2%, while construction output was down 5.1%.

The report was released today by INEGI, the official statistics agency.

Comment:  Because of the manufacturing sector's large size, the fourth straight gain in factory output during August provides some hope that the Mexican economy can avoid slipping into recession.  The rise in manufacturing probably reflects the recent increases in Mexican exports.  However, the partial shutdown of the U.S. government suggests those gains could easily be reversed in the near future.  The small gain in construction is also encouraging, given that the sector has been a major factor in Mexico's recent economic slowdown, but the sharp drop in public works serves as a reminder that much of the problem stems from the Mexican government's effort to tighten its control over public sector spending.  It is not at all clear when that effort will ease up.  Moreover, the increases in new building activity and the building trades were not nearly enough to reverse the declines in those areas during the previous two months.  The bottom line is that while there are some encouraging signs that Mexico can pull out of its current soft spot, the economy is not yet out of the woods.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1308

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