MexECON Blog

January Industrial Production Falls 0.4 Percent

Mexican industrial production fell by a seasonally-adjusted 0.4% in January, after a 0.3% decline in December and a revised 0.2% rise in November.  According to the report, the decline in January came in large part from the continued slide in Mexican mining production.  Mining output fell by 0.5%, for its fifth straight monthly decline and its ninth drop in the last twelve months.  Construction output dropped 1.5%, but that merely erased its big 1.5% jump in December.  Finally, Mexican manufacturing production edged down 0.1% in January, after a 1.7% drop in December and a 1.5% increase in November.  In contrast, January utility production rose 0.4%, after rising 1.7% in December.

On an unadjusted basis, overall industrial production in January was up just 0.3% from the same month one year earlier.  Construction output was up 4.2% year-over-year, and utility production was up 3.1%.  Manufacturing production was up 1.2% year-over-year.  However, mining output was down 5.9% from January 2013.

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

Comment:  In spite of its second straight monthly decline in January, the Mexican industrial sector should keep trending upward.  One reason is the recent solidification in the U.S. economy, which I expect will buoy Mexican exports and prompt increased factory activity.  Admittedly, exports have softened a bit during the last couple of months, but I suspect that simply reflects that U.S. inventories have gotten a bit out of hand recently.  Once the excess inventories are cleared away, I think Mexican exports and manufacturing will strengthen once again.  In addition, it appears that the Mexican construction sector is continuing to recover, thanks to increased residential and commercial construction.  The main drag on industrial activity remains mining, especially falling petroleum production.  The government's recent reform to allow private-sector investment in energy development is aimed at reversing Mexico's long slide in petroleum output, but the slump in global oil prices may be an obstacle.  The government has already been forced to revise its bidding procedures for new exploration and development projects in order to keep them attractive.  However, there is no guarantee that private companies will still be interested if oil prices remain so low, and that could delay any potential boost in energy production.

Patrick Fearon, CFA
Vice President, Fund Management

Industrial Production 1501

Industrial Production Detail by Industry 1501

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