Mexican industrial production rose in January by a
seasonally-adjusted 0.5%, essentially reversing its 0.5% decline in
December. According to the report, the rise in January
stemmed entirely from a strong 2.3% rebound in manufacturing
production. That increase was the sector's biggest since
mid-2012, though it was still not enough to offset the
declines of 1.7% in December and 0.8% in January. Meanwhile,
January mining output fell 0.1%, for its second straight monthly
decline, and utility output dropped 0.9%. Most discouraging
of all, Mexican construction output fell 1.2% in January, after
being unchanged in December and up 2.4% in November. Prior to
that, construction output had fallen for five straight
months. The drop in construction during January reflected a
sharp pullback in public works projects.
On an unadjusted basis, overall industrial production in January
was up 0.7% from the same month one year earlier.
Manufacturing output was up 2.5% year-over-year, and utility
production was up 0.3%. However, mining output was down 0.1%
year-over-year. Construction output fared even worse, with a
decline of 2.5% year-over-year.
The report was released today by INEGI, the official statistics
Comment: I found the January
production report disappointing. In spite of the rebound in
factory output during January, for example, manufacturing
production remains below the levels seen last summer and
autumn. Recent reports suggest Mexican exports have been
softening, even as imports may be starting to rise again, and that
could again push manufacturing downward in the coming months.
Likewise, while today's report showed that the construction of new
buildings has stabilized and that activity in the construction
trades has turned upward, the steep fall in public works
construction during January may be a sign that government spending
is still tightening. In sum, it appears that Mexico's
industrial sector will continue to face a number of international
and domestic challenges for a while yet.
Patrick Fearon, CFA
Vice President, Fund Management