MexECON Blog

October Industrial Production Rises 0.5 Percent

 

Mexican industrial production rose by a seasonally-adjusted 0.5% in October, for its strongest increase since February.  However, the rise was not enough to reverse the revised 0.7% decline in September.  According to the report, the increase in October came as output from the manufacturing sector jumped 1.0%, essentially erasing its 1.0% decline in September.  Mining output rose 0.7% in October, posting its third straight increase.  In contrast, October utility production fell 0.1%.  Even worse, October construction output declined 0.9%, after a fall of 1.1% in the previous month.  Mexican construction activity has now declined in nine of the last twelve months.
On an unadjusted basis, overall industrial production in October was up just 0.1% from the same month one year earlier.  Manufacturing output was up a healthy 3.5% year-over-year, while the mining and utility sectors both boosted production by 0.5%.  The main outlier was the construction sector, where output was down 7.4% year-over-year.
The report was released today by INEGI, the official statistics agency.
Comment:  Mexican industrial production dipped in early 2013, but it has now at least stabilized and may even be trending very gradually upward again.  However, the story is not quite as simple as the overall trend may suggest.  Manufacturers suffered a short and shallow pullback in late 2012 and early 2013, responding to softer exports to the United States.  With the apparent reacceleration in U.S. growth in recent months, Mexican manufacturing output is now growing again.  Output from Mexico's mining and utility sectors has been roughly stable over the last couple of years.  As shown in the second graph below, the main problem has been construction.  That sector has been devastated by shifting housing support policies and tight government spending over the last year and a half.  Building construction and public works activity have both fallen by approximately 10.0% from their most recent cycle peak, and I have seen no evidence that the trends will be reversed anytime soon.  While the Mexican economy did return to growth in the third quarter after a decline in the second quarter, the continuing problems in construction and in consumer demand make me pessimistic that growth can soon accelerate as some observers expect.
Patrick Fearon, CFA
Vice President, Fund Management

Mexican industrial production rose by a seasonally-adjusted 0.5% in October, for its strongest increase since February.  However, the rise was not enough to reverse the revised 0.7% decline in September.  According to the report, the increase in October came as output from the manufacturing sector jumped 1.0%, essentially erasing its 1.0% decline in September.  Mining output rose 0.7% in October, posting its third straight increase.  In contrast, October utility production fell 0.1%.  Even worse, October construction output declined 0.9%, after a fall of 1.1% in the previous month.  Mexican construction activity has now declined in nine of the last twelve months.

On an unadjusted basis, overall industrial production in October was up just 0.1% from the same month one year earlier.  Manufacturing output was up a healthy 3.5% year-over-year, while the mining and utility sectors both boosted production by 0.5%.  The main outlier was the construction sector, where output was down 7.4% year-over-year.

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

Comment: Mexican industrial production dipped in early 2013, but it has now at least stabilized and may even be trending very gradually upward again.  However, the story is not quite as simple as the overall trend may suggest.  Manufacturers suffered a short and shallow pullback in late 2012 and early 2013, responding to softer exports to the United States.  With the apparent reacceleration in U.S. growth in recent months, Mexican manufacturing output is now growing again.  Output from Mexico's mining and utility sectors has been roughly stable over the last couple of years.  As shown in the second graph below, the main problem has been construction.  That sector has been devastated by shifting housing support policies and tight government spending over the last year and a half.  Building construction and public works activity have both fallen by approximately 10.0% from their most recent cycle peak.  I have seen no evidence that the trends will be reversed anytime soon.  While the Mexican economy did return to growth in the third quarter after a decline in the second quarter, the continuing problems in construction and in consumer demand make me pessimistic that growth can soon accelerate as some observers expect.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1310

Industrial Production Detail 1310

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