MexECON Blog

November Industrial Production Rises 0.1 Percent

Mexican industrial production rose by a seasonally-adjusted 0.1% in November, after a revised 0.4% expansion in October.  Even with these increases, however, output has not yet reversed its big 0.7% decline in September.  According to the report, construction output broke a string of five straight declines in November, jumping 1.8%.  November mining production and utility output both rose 0.1%.  However, November manufacturing output slumped 1.0%, erasing its 0.8% rise in October.

On an unadjusted basis, overall industrial production in November was down 1.4% from the same month one year earlier.  Manufacturing output was up 0.6% year-over-year, and utility production was up 0.4%.  In contrast, mining output was down 2.3%, and construction was down 5.0%.

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

Comment:  Overall industrial production in Mexico still looks like it has stabilized and may even be trending gradually upward again.  However, the outlook is not entirely clear.  For example, the big jump in construction during November could be just a blip in an otherwise unrelenting downward trend.  Much of the problem in construction stems from a shift in the government's housing support policies.  That shift has reduced subsidies for housing construction and changed the rules regarding what kinds of residential projects the government will support.  These changes have left many residential construction firms in dire financial straits, so they would have trouble ramping up production even if they could identify attractive projects.  In addition, the normal drop in Mexico's government spending after a change in presidents has become extraordinarily extended.  President Enrique Peña Nieto was inaugurated in December 2012, but outlays remain virtually frozen as the new administration shifts spending on public works projects and other programs to meet its own priorities and reward its own backers.  Finally, the choppy performance in Mexican manufacturing in the last few months is concerning.  The unsettling thing is that the manufacturing production data has been weaker than implied by other recent indicators, such as reports of a modest strengthening in foreign trade and healthy readings on Mexico's purchasing managers' index for the manufacturing sector.  In sum, these details suggest that Mexico's industrial sector is still dealing with some significant challenges.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1311

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