MexECON Blog

June Industrial Production Falls 0.2 Percent

Mexican industrial production fell by a seasonally-adjusted 0.2% in June, but the decline reversed only a small part of the previous five months of gains.  According to the report, the fall in June came mostly from a decline in manufacturing.  Output in that sector was down 0.7%, erasing its 0.3% rise in May.  Mining production fell 0.6%, offsetting its 0.6% rise in the previous month.  June utility production was flat.  On a more positive note, construction output jumped 1.2%, marking its fifth straight monthly rise and its strongest increase since last November.

On an unadjusted basis, overall industrial production in June was up 2.0% from the same month one year earlier.  Manufacturing output was up 3.4% year-over-year.  Just as important, construction output was up 2.2%, marking its first year-over-year rise since November 2012.  Utility output was up 1.3% year-over-year, but mining output was down 1.3%.

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

Comment:  Mexican industrial production remains in a modest uptrend, in spite of the small pullback in June.  Manufacturing continues to account for most of the strength in the sector.  Nevertheless, the key story in the June report was that construction finally appears to be in a clear rebound.  Construction activity was in a prolonged downslide from mid-2012 through the end of 2013, as a change in government housing policy weighed on residential construction.  In addition, tight fiscal policy left little funding available for public works projects.  Now, it appears construction hit bottom around the beginning of the year.  Construction is still relatively weak, and I suspect it will take some time for the sector to fully recover.  Nevertheless, it looks like Mexican exports, manufacturing, and construction are all in a coordinated upswing, helping offset continued drag from the soft labor market and weak consumer spending.  Mexican economic growth seems certain to accelerate further, though it is still unclear just how strong the growth will be.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1406

Industrial Production Detail on Construction 1406

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