MexECON Blog

December Fixed Investment Falls 0.4 Percent

Gross fixed investment in Mexico fell by a seasonally-adjusted 0.4% in December, after a revised 2.0% gain in November.  Prior to that, investment had fallen in every month from May through October.  According to the report, the fall in investment during December stemmed entirely from a 0.8% decline in construction.  Activity in the construction sector had jumped 2.4% in the previous month, but it had declined for five straight months before that.  In contrast, December investment in machinery and equipment rose 0.5%, almost erasing its 0.6% decline in January.

On an unadjusted basis, total fixed investment in December was up 0.7% from the same month one year earlier.  Investment in machinery and equipment was up a strong 8.9% year-over-year, but construction was down 3.6%.

In full-year 2013, total fixed investment in Mexico was down 1.8% from 2012.  Machinery and equipment investment was up 4.1%, but construction investment was down 5.0%.

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

Comment:  Mexico's monthly report on industrial production is timelier than the report on fixed investment, and the production report last month had pointed to a slight rise in December construction.  That raised hopes that Mexico's construction sector might be finding its footing again after a long slide from late 2012 to late 2013.  The sector has suffered mightily from a change in the government's housing support policies and a cut in public works spending.  If homebuilders can adjust to the new policies, and if the government follows through on its promise to loosen fiscal policy, those problems are likely to reverse.  Unfortunately, the significant decline in December construction shown in today's report suggests the recovery has not yet arrived.  Weak domestic demand - including falling construction, tight government spending, and low consumer confidence - will probably continue to weigh on Mexican economic growth for a while yet.

Patrick Fearon, CFA
Vice President, Fund Management

                                       Gross Fixed Investment in Mexico
                                         Seasonally Adjusted, 2008 = 100
                                                   Source:  INEGI
Fixed Investment 1312

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