Macro Analysis /
Global

Mexico: Ahead of the Curve

  • We expect February’s industrial production to keep growing (0.1% m/m)

  • By sectors, we expect growth to be mainly supported by manufacturing (0.3% m/m), but dragged by mining (-3.6% m/m)

  • Other indicators to be released include March’s ANTAD sales and the weekly international reserves report

Juan Carlos Alderete Macal
Juan Carlos Alderete Macal

Director of Economic Research

Francisco Jose Flores Serrano
Francisco Jose Flores Serrano

Senior Economist, Mexico

Banorte
9 April 2022
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Industry likely boosted by manufacturing in February

  • Industrial production (February). We expect IP at +3.8% y/y (previous: 4.3%). Part of the deceleration is due to a more challenging base effect, although also impacted by a negative calendar effect. Adjusting for this, figures would show a 3.7% y/y expansion, better than INEGI’s 3.5% estimate within the Timely Indicator of Economic Activity. More importantly, this implies an 0.1% m/m increase, which we believe is positive considering accumulated growth of 3.3% in the previous four months. By sectors, we expect progress in manufacturing (0.3% m/m) and construction (0.2%), with a hefty setback in mining (-3.6%)

Proceeding in chronological order...

Industry to decline in February with a more challenging base effect. We expect IP at +3.8% y/y (previous: 4.3%). Part of the deceleration is due to a more challenging base effect, although also impacted by a negative calendar effect, considering that there was an additional working day in January in the annual comparison. Despite of this, with seasonally adjusted figures, we expect an expansion of 3.7% y/y, which would be better than the estimate within INEGI’s Timely Indicator of Economic Activity at 3.5%. More importantly, this implies an 0.1% m/m increase, which we believe is positive considering accumulated growth of 3.3% in previous four months.

Manufacturing would climb 0.3 m/m (+6.4% y/y), with quite positive signs  –including epidemiological conditions–. Overall, the IMEF’s manufacturing PMI rose to 51.1pts, with an improvement in all categories. More specific, the auto sector seems to be giving more signs of recovery, evidenced by both exports (+34.7% m/m) as well as production reported by AMIA (240.5 thousand units; +8.0% m/m). Meanwhile, the rest of the signs from abroad are favorable, with non-auto shipments at +9.3%, boosted by sequential acceleration from this sector in the US, also rebounding from the impact of the virus. On a more mixed note, a 2.5 thousand job loss was reported for total manufacturing employment, despite the rebound of 66.9 thousand positions for the sector affiliated to IMSS.

Construction would advance, although only 0.2% m/m (-1.1 y/y) and after a decline in the previous month. Although the signs from opinion indicators are positive (e.g. consumer confidence and the aggregate trend indicator), we believe that backdrop for prices in the sector –with constant increases that are reflected in the PPI– will continue to impact edification. However, civil engineering works could remain relatively strong, supported by progress in key projects –mainly the Felipe Ángeles Airport–. This is partly reflected in the spending in physical investment from the Federal Government, up 16.2% y/y in real terms. Lastly, the signs from employment are better, with increases in both IMSS (+26.3 thousand) and the one reported by INEGI (+202.0 thousand).

On the other hand, we expect a substantial decline in mining, down 3.6% m/m (1.3% y/y). The fall would be driven by a normalization in ‘related services’ sector, considering that they grew 21.8% m/m the previous month, which does not seem to be sustainable. Meanwhile, signs from production in the oil sector were slightly negative, with crude output according to the National Hydrocarbons Commission (CNH in Spanish) decreasing to 1,634kbpd (previous: 1,652kbpd) and with gas showing a similar trend. On the contrary, prices of metals and other commodities kept climbing, supporting the non-oil sector.

Weekly international reserves report. Last week, net international reserves increased by US$195 million, closing at US$200.7 billion. According to Banxico’s report, this was explained by: (1) A sale of US$200 million from Pemex to the central bank; and (2) a negative valuation effect in institutional assets of US$5 million. Year-to-date, the central bank’s international reserves have fallen by US$1.6 billion.