Mexican industrial production falls sequentially in Q3

Mexican industrial production began the third quarter on a negative note with construction activity dropping in July from the previous month. Construction fell 2.1 percent sequentially, whereas mining activity and utilities output fell 1.4 percent and 0.3 percent, respectively. Evidently, construction output has been impacted by higher interest rates in 2017. These three sectors have continued to drive industrial output lower, with mining output falling 8.6 percent year-on-year, construction output down 3.7 percent and utilities output down 2.7 percent on a year on-year basis. Mining output in the preceding month was improving slightly or at least no longer declining. The July report suggests that the deterioration in the sector has resumed, stated Wells Fargo in a research report.

On a year-on-year basis, Mexico’s industrial output fell 1.6 percent year-on-year. Year-to-date, industrial activity dropped 0.5 percent through July compared to the same period a year earlier. The manufacturing sector continues to be the only bright spot on the Mexican industrial side. It is mainly driven by its automobile production.

Manufacturing activity of Mexico rose 0.3 percent in July as compared to June, while it rose 2.2 percent on a year-on-year basis. Even if manufacturing activity was the only positive sector of industrial production in July, the sector has also decelerated according to the year-over-year index.

Automobile, light trucks and parts production rose 9.8 percent year-on-year in July and rose 11.4 percent year-to-date through July 2017. Even if it is not the only manufacturing sector that is expanding, it is the most vital sector of Mexican manufacturing activity. Therefore, the results of the renegotiation between the U.S., Mexico and Canada on the future of NAFTA would be of the most importance for the performance of the Mexican economy, particularly due to the automobile sector’s output is exported to the U.S. Therefore, any negative decision about auto exports from Mexico to the U.S. market would be a major negative for the Mexican industrial sector and for the Mexican economy as a whole.

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