MexECON Blog

April Industrial Production Rises 0.6 Percent

Mexican industrial production rose by a seasonally-adjusted 0.6% in April, for its fourth straight monthly increase.  Revised figures showed production expanded 0.2% in March, 0.4% in February, and 0.6% in January.  According to the report, April utility output jumped 1.3%, for its best increase since late 2011.  However, utilities make up only a small part of Mexico's industrial production.  Most of the increase in industrial activity during April stemmed from a strong 1.1% rise in the key manufacturing sector, which easily reversed its slight 0.1% decline in March.  Construction output rose a more modest 0.6% in April, but upwardly revised data showed it was up by the same magnitude in both March and February.  In contrast, April mining output fell 0.4%, after a fall of 0.3% in the previous month.

On an unadjusted basis, overall industrial production in April was down 0.6% from the same month one year earlier.  Utility production was up 1.6% year-over-year, but output was down 0.1% in both the manufacturing and mining industries.  Construction remained the weakest subsector, with output down 2.6% year-over-year.

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

Comment:  Mexican industrial activity is clearly on the upswing.  Production in April may have been down in year-over-year terms, but that was almost certainly because the Easter holidays fell in April this year and March last year.  More telling, the output gain from January through April was the strongest four-month increase since late 2011.  The dominant manufacturing sector continues to outperform, mostly because of the country's recent rebound in exports.  Just as important, today's report suggests the long-suffering construction sector may also be starting to rebound.  In fact, overall construction in Mexico has now risen for three straight months for the first time since early 2012.  Since that time, a change in government housing policy has decimated homebuilding activity, even as tighter fiscal policy has reduced public works activity.  Today's report suggests that building activity and the construction trades are now rebounding modestly, while public works activity has perhaps bottomed out.  Nevertheless, it is important to remember that construction as a whole remains relatively weak.  Since many of the country's homebuilders are now in dire straits, residential construction is likely to recover only slowly, and there is still little sign that the government is ready for a dramatic increase in public works spending.  I therefore suspect that construction will remain a headwind for the Mexican economy, keeping overall growth modest for the time being.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1404

Industrial Production Detail on Construction 1404

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