Mexican industrial production growth likely weakened further in April

Mexican industrial production growth in Q1 was significantly weaker than in H2 14 as weather-affected lower US demand growth slowed the investment and growth revival in the manufacturing sector (something reflected in the Q1 GDP number as well). Given the US economic data releases for April and Mexico's trade numbers, Societe Generale asumes, the industrial and manufacturing production slowed further in April (SGe: 1.0% yoy and 2.4% yoy respectively). 

The key source of the additional weakness in industrial production over the past few months has been falling production in the mining sector which has been more structural in nature. The recent IP slowdown is driven by low US demand owing to weather-related distortions. 

"However, both manufacturing and IP is expected to grow at a stronger pace from May onwards due to a strengthening in US growth and stronger Mexican domestic demand to reflect an improvement in the labour market indicators. Stronger IP growth should help the economy to grow to potential in 2015 and then strengthen in 2016", said Societe Generale.


The IP improvement since last year has largely been driven by strengthening US growth and a jump in vehicle exports. Mexico's real export growth has surged impressively recently. The improvement in the competitiveness of exports - and, therefore, stronger investment growth - was achieved via lower wage growth in a weak labour market. Analysts expect manufacturing and trade gains to boost the rest of the economy via the investment, employment, wage and sentiment channels. According to SocGen, the Mexican economy will likely grow by 2.6% in 2015 and 3.2% in 2016.