MexECON Blog

Industrial Production Flat in March

Mexican industrial production was unchanged in seasonally-adjusted terms during March, after a revised increase of 0.3% in February.  According to the report, March mining output was down 1.6%, for its 13th decrease in the last 16 months.  In addition, output from the key manufacturing sector was down 1.0%, wiping out its 1.0% rise in February.  Utility production was unchanged.  On a more positive note, March construction output jumped 3.0%, almost erasing the two previous months of declines.

On an unadjusted basis, Mexico's overall industrial production in March was up 1.7% from the same month one year earlier.  March mining production was down 5.3% year-over-year, but utility production was up 3.0%, and manufacturing output was up 3.1%.  Construction output was up a strong 5.2% year-over-year.

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

Comment:  Without a doubt, the unrelenting decline in oil production is a key factor holding down Mexico's overall industrial production.  The government's reform allowing private-sector investment in the energy industry could eventually spark a turnaround, but not in the near term.  For now, years of under-investment and the more recent slide in global oil prices will continue to undercut output.  Just as important, a slowdown in U.S. industrial activity has cooled the demand for Mexican exports, cutting activity in the Mexican factory sector.  U.S. firms are likely to face a protracted period of weak economic growth in Europe and Asia, a strong dollar that further weighs on foreign demand, reduced energy investment, and bloated inventories.  Fortunately, however, today's report shows that the recovery in Mexico's private-sector construction is continuing.  Coupled with a stronger labor market that should support improved consumer spending, the continuing uptrend in private investment should help offset the slowdown in mining and manufacturing.

Patrick Fearon, CFA
Portfolio Manager

Industrial Production 1503

Industrial Production Detail by Industry 1503

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