Mexican industrial production fell by a seasonally-adjusted 0.4%
in May, after a 0.1% decline in April and a revised flat reading in
March. The fall in May was the steepest since mid-2013.
According to the report, the decrease stemmed in large part from
falling production in the dominant manufacturing sector.
Output from Mexican factories fell 0.9% in May, erasing almost half
of the 2.0% jump in the previous month. Construction output
fell 1.5%, after being flat in April, and utility production fell
for a third straight month. Mexican mining production was up
0.7% in May, but that was only the second increase in the sector
during the last nine months.
On an unadjusted basis, overall industrial production in May was
down 0.9% from the same month one year earlier. May
construction output was up 1.6% year-over-year, while utility
production was up 1.2% and manufacturing output was up 0.8%.
In contrast, May mining output was down a sharp 8.0%
The report was released on Friday by INEGI, the official
Comment: Mexico's industrial
sector has clearly slowed down in recent months. Weaker U.S.
demand for Mexican exports has been a headwind for the country's
manufacturers, while growth in the domestic construction sector has
moderated. Nevertheless, I remain optimistic that those
sectors will continue to trend upward, especially if economic
growth reaccelerates north of the border and private investment
continues to rise within Mexico itself. Perhaps the biggest
issue is that overall industrial production is likely to be held in
check by the continued slide in Mexican mining output. The
fall in mining output mostly reflects declining petroleum
production. The government's reform allowing private-sector
investment in the energy industry is being implemented, and it
could eventually spark a rebound in extraction. For now,
however, low oil prices and the slow process of leasing, planning,
and developing new projects mean that the country's oil output is
likely to keep sliding for a while yet.
Patrick Fearon, CFA