Mexico’s industrial output growth likely to weaken in 2016

Mexico’s industrial production has recorded three positive readings in 2016 in the initial four months on a year-on-year basis. However, the output growth has been declining since then on a sequential as well as on seasonally adjusted basis.

Growth in March was particularly bad as growth slowed in all the major categories of industrial output. As a result, in spite of the expected growth on back  of the first positive exports growth, industrial output expansion has accelerated very slowly as compared to the second half of 2015.

Given the uncertain global and the US economic growth outlook and the Bank of Mexico hiking rates by 100 basis points in 2016, domestic demand growth of Mexico is expected to accelerate in the future, said Societe Generale in a research report. Given the exception of certain rebound in the mining sector, which will benefit from the base effect, the other sectors are expected to expand at a timid rate, added Societe Generale.

“We don’t see IP facing an immediate contraction particularly if exports grow stronger. However, the positive view of stronger IP growth in 2016 (than in 2015) is fading,” stated Societe Generale.