MexECON Blog

July Fixed Investment Rises 0.6 Percent

Gross fixed investment in Mexico rose by a seasonally-adjusted 0.6% during July, after revised increases of 0.3% in June, 0.8% in May, and 1.0% in April.  According to the report, the rise in July came in part from a 2.1% increase in machinery and equipment investment, though that increase was not enough to offset the category's 3.3% decline in the prior month.  The rise in July also reflected a 0.3% increase in construction, after it was up 1.6% in the prior month.  The subcategory of residential construction was up for a sixth straight month.

On an unadjusted basis, total fixed investment in July was up 3.1% from the same month one year earlier.  Investment in machinery and equipment was up 4.3% year-over-year, while investment in new construction was up 2.4%.

The report was released earlier this week by INEGI, the official statistics agency.

Comment:  The continuing uptrend in machinery and equipment investment is certainly a positive for Mexico, but the more important development is the recovery in construction after a long period of extreme weakness.  The more timely report on industrial production, due out on Friday, will show whether construction continued to rebound in August.  If it did, it would join the recent acceleration in exports as a key reason for the strengthening in Mexican economic growth.  Nevertheless, I continue to believe that the relatively soft labor market and high inflation will be a headwind for consumer demand and overall economic growth in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Gross Fixed Investment in Mexico
                                            Seasonally Adjusted, 2008 = 100
                                                          Source:  INEGI
Fixed Investment 1407

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