MexECON Blog

Industrial Production Still In the Doldrums

Mexican industrial production rose by a seasonally-adjusted 0.2% in June, after a revised 0.4% decline in May and flat readings in each of the two months before that.  According to the report, the rise in June came in large part from a surprising rebound in the mining sector.  Falling petroleum output has been pulling down mining production since the end of 2013.  In June, however, increased oil production and stronger activity in mining services boosted the sector's overall output by 1.1%, following a rise of 0.6% in May.  Meanwhile, June utility output rose 0.6%, after four straight months of declines, and construction output rose 0.4%.  Production in the key manufacturing sector edged up 0.1% in June.

On an unadjusted basis, overall industrial production in June was up 1.4% from the same month one year earlier.  June mining output was down 6.2% year-over-year, but utility production and construction were both up 2.1%.  June manufacturing production was up 4.2% year-over-year.

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

Comment:  Activity in Mexico's industrial sector has essentially flattened out over the last year.  One major drag has been the continuing slide in Mexican 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, oil output is suffering from a legacy of past underinvestment, current low oil prices, and a slow process for leasing, planning, and developing new projects.  It seems much too early to expect a sustained and significant rebound in petroleum production, in spite of the increases in May and June.  There is some chance that stronger U.S. demand will keep manufacturing on an uptrend, and the domestic construction sector looks set to keep growing moderately, but weak petroleum output will probably continue to weigh on the industrial sector in the coming months.

Patrick Fearon, CFA
Portfolio Manager

Industrial Production 1506

Industrial Production Detail by Industry 1506

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