MexECON Blog

February Fixed Investment Drops Sharply

Gross fixed investment in Mexico plunged by a seasonally-adjusted 3.8% during February, easily wiping out its revised 1.8% gain in January and marking its worst drop since the end of 2012.  According to the report, the decline in February came mostly from a 7.6% plunge in machinery and equipment investment.  That drop essentially erased the category's big 7.7% increase in the previous month.  In addition, investment in new construction pulled back 1.6% in February, as residential construction posted its second straight monthly decrease.

On an unadjusted basis, total fixed investment in February was up 1.3% from the same month one year earlier.  Machinery and equipment investment was up 1.9% year-over-year, but construction was up just 0.9%.

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

Comment:  Investment can be volatile, so the big drop in February is not necessarily a major concern.  It still appears that commercial investment in Mexico is on an upward trend, providing much of the country's moderate economic growth in recent quarters.  Relatively strong exports and a strengthening labor market that is likely to support stronger consumer spending could encourage further gains in commercial investment going forward.  The main yellow flag in the fixed investment report was the second straight decline in residential housing investment.  It may simply be that the big recovery in housing over the last year has finally run its course, and the sector will be much more stable going forward, with significant periods of ups and downs.  However, it will be important to pay close attention in order to see if it develops into a renewed downturn.

Patrick Fearon, CFA
Portfolio Manager

Fixed Investment 1502

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