Macro Analysis / Mexico

Mexico: Industry recovery continues with a positive surprise in construction

  • Industrial production (August): -9.0% y/y nsa; consensus: -10.3% (range: -13.0% to -8.1%); previous: -11.4%
  • Activity rose 3.3% m/m. We saw strong positive surprise in construction (11.2%), while manufacturing decelerated
  • We maintain that externally dependent sectors will drive the recovery, although with favorable signs in domestic demand

Industrial production (August): -9.0% y/y nsa; Banorte: -10.6%; consensus: -10.3% (range: -13.0% to -8.1%); previous: -11.4%

The figure was higher for a third consecutive month, consistent with the steps taken to reopen the economy. In this context, year-to-date, industry has declined by 13.1% y/y.

In monthly terms, activity rose 3.3%, better than our expectations, but still decelerating relative to previous months. Despite of the latter, this figure is positive and is partly due to a more difficult base effect, as industry has led the rebound in activity.

Mining advanced 0.8%, with a relatively balanced mixed between non-oil (+1.1%) and oil (+1.6%), with the latter benefiting from better weather conditions.

Construction surprised to the upside at +11.2%. Inside, the acceleration was mainly driven by edification (+15.1%), signal which we consider to be especially favorable considering last month’s stagnation. Meanwhile, civil engineering was more moderate but also positive (+2.0%).

Manufacturing decelerated significantly to +0.8% (previous: +11.3%), with a decline in food (-1.0%), transportation (-2.2%) and electronical (-3.7%) equipment compensating for increases in all other components.

We maintain our view that externally dependent sectors, such as manufacturing, will continue to drive the recovery, albeit with more uncertainty about a possibly speedier recovery in domestic demand.

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