MexECON Blog

Industrial Production Falls Again

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% year-over-year.

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

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
Portfolio Manager

Industrial Production 1505

Industrial Production Detail by Industry 1505

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