MexECON Blog

August Fixed Investment Falls 1.4 Percent

Gross fixed investment in Mexico fell by a seasonally-adjusted 1.4% during August, easily erasing its revised 0.4% rise in July.  Mexican fixed investment has now declined in seven of the last twelve months.  According to the report, investment in machinery and equipment dropped by a sharp 4.2% in August, compared with a 0.6% gain in July.  In contrast, investment in new construction edged up 0.1%, building on a 0.4% rise in the previous month.

On an unadjusted basis, total fixed investment in August was down 5.4% from the same month one year earlier.  Machinery and equipment investment was down 4.9% year-over-year, while construction was down 5.7%.

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

Comment:  The August investment decline is consistent with several indicators showing the Mexican economy was stumbling at mid-year.  However, the report may not be entirely discouraging.  For one thing, investment in machinery and equipment can be choppy, so the sharp drop in that category during August may well have been reversed in September.  Moreover, the small, back-to-back increases in construction suggest that sector could be starting to stabilize after plunging from mid-2012 to mid-2013, when tightened government spending and a change in the government's housing support policies started to have an impact.  The September industrial production report on Monday will show whether the construction gains have continued.  Since the construction sector has been a major drag on the economy for the last year, any stabilization or recovery would help ease concerns about a recession or prolonged stagnation in Mexico.

Patrick Fearon, CFA
Vice President, Fund Management

                                        Gross Fixed Investment in Mexico
                                          Seasonally Adjusted, 2008 = 100
                                                       Source:  INEGI
Fixed Investment 1308

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