MexECON Blog

December Industrial Production Falls 2.1 Percent

Mexican industrial production dropped by a seasonally-adjusted 2.1% in December, reversing its revised 1.3% gain in November.  The decline in December stemmed mostly from a sharp 2.7% fall in construction activity.  Construction in Mexico has now declined for three straight months, and it has decreased in five of the last six months.  Construction of new buildings has been especially weak, while public works construction has fallen less sharply.  The report also showed that mining output declined 2.1% in December, after an unusually strong increase in the prior month.  Utility output edged down 0.5%.  Manufacturing output fell 1.1%, after a rise of 0.9% in November.  On an unadjusted basis, Mexico's overall industrial production in December was down 1.1% from the same month one year earlier.  The report was released today by INEGI, the official statistics agency.

Comment:  Today's report says Mexican manufacturing declined in December, but that appears to contradict the recent record-high readings for the sector's purchasing managers index.  That raises the question whether today's report may reflect distortions from the seasonal adjustment process at year's end.  Several U.S. data series are also subject to such distortions around the holidays, so it would be no surprise if Mexico suffers from the same problem.  Nevertheless, it is clear that Mexico's construction industry has been weak since last summer.  Construction and mining together have been so weak that they have noticeably dragged down the overall industrial production numbers.  At this point, it is not entirely clear why these industries have been slowing down so much.  The slowing may simply reflect great caution at the end of 2012, and now that the international scene looks less risky, construction in particular may eventually start rising again, helping to put the overall industrial sector on a renewed upward path.

Patrick Fearon, CFA
Vice President, Fund Management

                                                Mexican Industrial Production
                                               Seasonally Adjusted, 2003 = 100
                                                            Source:  INEGI
Industrial Output 1212

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