MexECON Blog

December Fixed Investment Drops 1.0 Percent

Gross fixed investment in Mexico fell by a seasonally-adjusted 1.0% during December, but the decline reversed only a portion of the revised increases of 0.5% in November and 1.6% in October.  According to the report, the fall in December came mostly from a sharp 3.1% decrease in machinery and equipment investment.  In addition, however, construction pulled back 0.4%, marking its first decline since last April.  Residential construction jumped 1.8% in December, easily erasing a slight fall in November, but non-residential construction decreased 0.4%, for its third straight monthly drop.

On an unadjusted basis, total fixed investment in December was up 5.5% from the same month one year earlier.  Machinery and equipment investment was up 8.9% year-over-year, while construction was up 3.6%.

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

Comment:  The pullback in Mexican investment at the end of 2014 bears watching, but I do not expect it to develop into a continued, broad-based problem.  After all, the weakness in December came almost entirely from a fall in commercial investment, which can be volatile.  Mexican exports, manufacturing, and residential construction all remain relatively strong.  Unemployment has also fallen sharply in recent months, suggesting that firms will have to build new facilities to put their new employees to work.  There is therefore every chance that commercial investment will resume its recent uptrend, even as residential investment continues to recover.

Patrick Fearon, CFA
Vice President, Fund Management

Fixed Investment 1412

Fixed Investment by Type 1412

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