MexECON Blog

April Industrial Production Falls 1.7 Percent

Mexican industrial production fell by a seasonally-adjusted 1.7% in April, following a revised 0.4% decline in March.  That marked the first back-to-back declines in output since late 2008.  The decline in April came as construction activity dropped a sharp 3.1%, erasing almost all of its gains since the beginning of the year.  Public works construction, the erection of new buildings, and activity in the building trades all declined after posting modest increases during the previous month.  Likewise, April mining production dropped 2.9%, while manufacturing output fell 1.2%.  In contrast, utility production rose 1.1%.

On an unadjusted basis, overall industrial production in April was up 3.3% from the same month one year earlier.  However, that may in part reflect the fact that the Easter holiday fell during April in 2012 and during March in 2013.

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

Comment:  The sharp, broad-based decline in April construction activity is unsettling.  Mexico's construction sector was weak throughout the second half of 2012, in large part because housing has been nearly frozen by a change in government support programs and in part because public works was partially on hold ahead of the December inauguration of Mexico's new president.  Modest increases in construction during the first three months of 2013 suggested the sector was on the mend, but the drop in April shows it is still too early to sound the "all clear" signal.  The decline in manufacturing is also of significant concern, since the factory sector is such a large part of Mexico's economy.  Other reports generally suggest manufacturing is still growing, but a slowdown may be in the works.  I continue to believe that the overall Mexican economy is in a tentative rebound from its soft spot at the turn of the year, and I suspect it will keep growing in the coming months.  However, the pace of growth is likely to be modest, and risks are elevated.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Output 1304

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