Mexican industrial production rose by a seasonally-adjusted 0.4%
during August, after a revised 0.2% gain in July. The rise in
August was the strongest since April, and it was enough to bring
output to a new record high. According to the report, the
August gain reflected increases in three of the four
subcategories. Construction output jumped 1.2%, after a
decline of 0.2% in July and a surge of 1.3% in June. The
erection of new buildings and output in the construction trades
both rose strongly in August, though public works construction fell
for a second straight month. Meanwhile, August utility output
rose 1.0%, marking its third straight monthly gain. Mining
production rose 0.3%, after two months of declines.
Manufacturing output edged down 0.3% in August, but that erased
only a small portion of its 1.1% gain in the previous month.
On an unadjusted basis, overall industrial production in August
was up 1.4% from the same month one year earlier.
Construction output was up 4.5% year-over-year, while utility
production was up 1.5%. Manufacturing output was up 1.4%
year-over-year, but mining output was down 1.6%.
The report was released today by INEGI, the official statistics
Comment: The ongoing uptrend in
Mexican industry stems mostly from accelerating exports, which have
bolstered factory production. Since exports continue to rise,
the small pullback in manufacturing during August is probably just
a momentary setback. Almost as important, private-sector
construction is clearly rebounding after a long period of extreme
weakness. Public works construction may still be weak, but if
the government finally follows through on its plans to boost
spending, the construction sector as a whole could become a key
part of Mexico's economic growth in the coming months and
quarters. If the rise in manufacturing and construction
prompt stronger hiring, consumer sentiment could also improve,
eventually removing the headwind of weak consumer spending.
Patrick Fearon, CFA
Vice President, Fund Management