Mexican industrial production rose by a seasonally-adjusted 0.2%
during February, rebounding slightly from its revised declines of
0.1% in January and 0.3% in December. According to the
report, the rise in February came mostly from a 1.0% gain in the
large manufacturing sector. Output also increased 1.5% in the
smaller mining industry, but that came after five straight months
in which the production of petroleum and other mining products
declined. February utility production edged up 0.1%. In
contrast, construction output shrank 2.2%, following a 0.7%
decrease in January. That marked the construction industry's
first back-to-back declines since late 2013.
On an unadjusted basis, overall industrial production in
February was up 1.6% from the same month one year earlier.
Manufacturing output was up 4.0% year-over-year, and utility
production was up 3.8%. However, construction output was up a
mere 1.1% year-over-year, and mining production was down 3.8%.
The report was released today by INEGI, the official statistics
Comment: The Mexican
manufacturing sector continues to gain ground, in large part
because of relatively strong U.S. demand for Mexican exports.
As reflected in the soft factory activity around the turn of the
year, U.S. demand is currently facing some challenges, such as a
tough winter, the strong dollar, and excessive inventories.
Nevertheless, economic growth in the United States remains strong
enough to spur greater output from Mexico's manufacturers.
The growth in manufacturing has helped offset the downtrend in
Mexican mining output. The most worrisome aspect of today's
report is the unexpected pullback in construction. That
sector had been in a strong recovery over the last year, so the
declines in early 2015 are cause for concern. It is not yet
clear why construction has faltered, and there is a chance that the
sector will resume its uptrend in the coming months. If
construction enters a new downward phase, however, it could be a
significant headwind for the Mexican economy.
Patrick Fearon, CFA