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
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
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