MexECON Blog

March Fixed Investment Falls 0.5 Percent

Gross fixed investment in Mexico fell by a seasonally-adjusted 0.5% in March, but that erased only a small part of the revised 1.7% gain in February.  The decline in March stemmed entirely from a 1.2% pullback in machinery and equipment investment, which followed a 2.8% increase in the category during the previous month.  On a more positive note, investment in new construction increased 0.3% in March, after rising 0.7% in February and 4.0% in January.

On an unadjusted basis, total fixed investment in March was down 5.5% from the same month one year earlier.

The report was released on Thursday by Mexico's official statistics agency, known as INEGI.

Comment: Despite the small pullback in March, it appears Mexican fixed investment is on an uptrend again after stumbling at the turn of the year.  That is consistent with other recent reports that suggest important sectors such as exports are also in a tentative recovery.  And even though the data show that investment in March was down sharply year-over-year, the decline would have been much smaller if investment hadn't posted an unusual surge in March 2012.  The most positive aspect of the report was the third straight month of increased construction activity.  Mexican construction had been very weak throughout the second half of 2012, in large part because homebuilding has been nearly frozen by a change in government support programs, while public works spending was disrupted by the inauguration of Mexico's new president at the end of 2012.  Now, it appears construction could be on a sustained uptrend again.  If next Tuesday's report on April industrial production shows that construction has continued to strengthen, it would help confirm that the Mexican economy really is regaining its footing again after the soft spot at the turn of the year.

Patrick Fearon, CFA
Vice President, Fund Management

                                     Gross Fixed Investment in Mexico
                                        Seasonally Adjusted, 2003 = 100
                                                    Source:  INEGI

Fixed Investment 1303

Gross fixed investment in Mexico fell by a seasonally-adjusted 0.5% in March, but that erased only a small part of the revised 1.7% gain in February.  The decline in March stemmed entirely from a 1.2% pullback in machinery and equipment investment, which came after a 2.8% increase in the category during the previous month.  On a more positive note, investment in new construction increased 0.3% in March, after rising 0.7% in February and 4.0% in January.
On an unadjusted basis, total fixed investment in March was down 5.5% from the same month one year earlier.
The report was released on Thursday by Mexico's official statistics agency, known as INEGI.
Comment:  Despite the small pullback in March, it appears that Mexican fixed investment is on an uptrend again after stumbling at the turn of the year.  That is consistent with other recent reports that suggest important sectors such as exports are also in a tentative recovery.  And even though the data show that investment in March was down sharply year-over-year, the decline would have been much smaller if investment hadn't posted an unusual surge in March 2012.  The most positive aspect of the report was the third straight month of increased construction activity.  Mexican construction had been very weak throughout the second half of 2012, in large part because homebuilding has been nearly frozen by a change in government support programs, while public works spending was disrupted by the inauguration of Mexico's new president at the end of 2012.  Now, it appears construction could be on a sustained uptrend again.  If next Tuesday's report on April industrial production shows that construction has continued to strengthen, it would help confirm that the Mexican economy really is regaining its footing again after the soft spot at the turn of the year.
Patrick Fearon, CFA
Vice President, Fund Management
Gross Fixed Investment in Mexico
Seasonally Adjusted, 2003 = 100
Source:  INEGI

 

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