MexECON Blog

August Industrial Production Rises 0.4 Percent

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 agency.

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

Industrial Production 1408

Industrial Production Detail on Construction 1408

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