Gross fixed investment in Mexico fell by a seasonally-adjusted
0.4% during March, marking the third decline in the last four
months and erasing much of the revised 1.3% increase in
February. The decline in March came in large part from a 2.0%
drop in machinery and equipment investment, although that came
after a big jump of 5.6% in the previous month. Investment in
new construction was also down in March, but only by 0.4%.
On an unadjusted basis, total fixed investment in March was up
1.7% from the same month one year earlier. Investment in
machinery and equipment was up a healthy 8.4% year-over-year, but
construction was down 2.2%.
The report was released today by INEGI, the official statistics
Comment: I would not be too
concerned about the March pullback in machinery and equipment
investment. That category can be volatile, and the decline in
March reversed only a portion of the jump in February.
Mexican investment in machinery and equipment still seems to be on
a renewed upswing, after stagnating in late 2013. The main
disappointment in today's report is the continuing weakness in
construction. In fact, the decline in construction during
March was enough to reverse all of the category's rise in the
previous month. Tomorrow's monthly report on industrial
production will show whether construction continued to fall in
April. Given the persistent problems in Mexican public works
and homebuilding activity, I suspect that construction will
continue to look weak. Banco de México's surprise
interest-rate cut last week was probably geared in part to ease
financing conditions for Mexico's stressed homebuilders and create
better conditions for a return to residential construction.
Nevertheless, any positive impact from the rate cut will take some
time to show up. Lethargic construction will probably
continue to be a major headwind for the Mexican economy, helping to
keep growth muted for the time being.
Patrick Fearon, CFA
Vice President, Fund Management
Fixed Investment in Mexico
Seasonally Adjusted, 2008 = 100