Itaú BBA - MEXICO – Gross fixed investment improved at the margin

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MEXICO – Gross fixed investment improved at the margin

May 7, 2019

Uncertainty over the direction of domestic policy and the approval of the USMCA will continue to weigh on investment outlook

Gross fixed investment (GFI) came in above expectations in February. The monthly GFI decreased by 1.9% year-over-year in February, above our forecast of -3.5% and market expectations (-2.5%, as per Bloomberg). According to calendar adjusted figures, GFI decreased at a similar rate (-1.9% year-over-year, from 1.4% in January), taking the three month moving average contraction to 2.4% year-over-year (from -2.7% in January). Looking at the breakdown, also with calendar adjusted figures, construction investment decreased by 0.7% (from -1.6% in January), mainly dragged by non-residential investment. In turn, Machinery & Equipment (M&E) investment fell 5.1% in the quarter ended in February (from –4.4% in January).

However, at the margin gross fixed investment improved.  With seasonally adjusted figures, the quarter-over-quarter annualized rate (qoq/saar) stood at 4.1% (from -4.9% in January).  Within GFI, construction improved substantially to 12.9% qoq/saar in the quarter ended in February (from 5.5% in January), mainly supported by residential construction. Meanwhile, Machinery & Equipment kept contracting (-8.1%, from -15.1%).

The recovery of investment is unlikely to be lasting. Uncertainty over the direction of domestic policy and the approval of the USMCA by the U.S. Congress will continue to weigh on investment in the short-term. 


Julio Ruiz
 



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