MexECON Blog

July Fixed Investment Rises 0.5 Percent

Gross fixed investment in Mexico rose by a seasonally-adjusted 0.5% in July, erasing part of the revised decreases of 1.1% in June and 0.9% in May.  Investment in machinery and equipment jumped 1.6% during July, but construction rose by a more tepid 0.4%.

On an unadjusted basis, total fixed investment in July was down 0.4% from the same month one year earlier.  Machinery and equipment investment was up a strong 11.5%, but construction was down 6.6%.

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

Comment:  Despite the small rebound in new building during July, the construction sector remains a huge drag on the Mexican economy.  Construction has fallen in seven of the last twelve months, and the downtrend has been more than enough to offset the positive impact from increased investment in machinery and equipment.  Tight fiscal policy after the inauguration of Mexico's new president in December has sharply curtailed public works projects, while a change in housing policy has frozen home building.  Some observers also claim the declines in construction reflect the completion of big projects over the last year.  Whatever the cause, the construction decline is a major reason why the Mexican economy remains at risk of slipping into recession.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Gross Fixed Investment in Mexico
                                            Seasonally Adjusted, 2008 = 100
                                                        Source:  INEGI
Fixed Investment 1307

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