Mexican industrial production likely remained flat in November

The PMI surveys have indicated that Mexican manufacturing contracted in November; however, the strongest trade figures in over four years lead to a projection of a 1.7 percent year-on-year growth in manufacturing. Industrial production is expected to have come in flat in November on a year-on-year basis as the mining sector continued to shrink at a significant rate, according to a Societe Generale research report. However, on a sequential basis, the industrial output is expected to have risen 0.1 percent.

Following a modest rebound in the second quarter, industrial output weakened in the third quarter, while mining sector contracted at a rapid pace in October. Manufacturing growth in the September quarter was quite the same as the first half of 2016 average. But it has lacked strength given declining U.S. industrial production growth and the consequential impact on supply chains. This situation might possibly continue unless there is any evident improvement in the U.S. industrial production growth.

Given the ambiguity on U.S. trade policy at present, the medium-term industrial production outlook for Mexico continues to be flat, as rebounded demand growth in the U.S. would slightly offset the negative sentiment because of expected alterations to trade policies. However, if the low oil prices continue to impact mining sector investment, the domestic sector would possibly fail to raise overall industrial production growth from the current weak levels unless manufacturing bolsters.

“The recent rise in oil prices, if sustained, could help the Mexican trade, investment and growth outlook”, added Societe Generale.