MexECON Blog

May Fixed Investment Rises 0.5 Percent

Gross fixed investment in Mexico rose by a seasonally-adjusted 0.5% during May, after a revised 1.2% gain in April.  According to the report, the rise in May stemmed entirely from a gain in machinery and equipment investment.  That category was up 1.8%, following a strong 2.8% increase in April.  On a less positive note, May investment in new construction fell 0.8%, wiping out its 0.7% increase in the previous month.

On an unadjusted basis, total fixed investment in May was up a slight 0.4% from the same month one year earlier.  Machinery and equipment investment was up a healthy 4.5%, but construction was down 2.2%.

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

Comment:  Mexican investment in machinery and equipment has been rising at a healthy clip throughout the economy's current expansion phase, but construction was in a steep downtrend from mid-2012 through the end of 2013.  The decline in construction during the second half of last year was enough to pull overall investment downward.  Fortunately, construction finally started to show signs of stabilization earlier this year.  Its three straight months of increases from February through April marked the first such string of gains in several years, so the pullback in construction during May should not be too alarming.  The more timely report on industrial production, due out on Monday, will show whether construction was able to start rising again in June.  Coupled with a recent strengthening in Mexican exports, a continued stabilization or rebound in construction would help boost overall economic growth.  Nevertheless, construction is still not robust, and consumer spending remains soft, so any acceleration in economic growth is likely to be limited.

Patrick Fearon, CFA
Vice President, Fund Management

                                      Gross Fixed Investment in Mexico
                                        Seasonally Adjusted, 2008 = 100
                                                      Source:  INEGI
Fixed Investment 1405

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