Itaú BBA - MEXICO – Industrial production recovered further in July

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MEXICO – Industrial production recovered further in July

September 11, 2020

The manufacturing sector is the main driver of the recovery

Industrial production (IP) was above market expectations in July.  IP fell by 11.4% year-over-year in July, better than our forecast of -15.5% and market expectations of -12.9% (as per Bloomberg). According to figures adjusted by working days, IP contracted at a similar rate (11.5% year-over-year), taking the quarterly annual rate to -19.6% in July (from -25.7% in June). Looking at the breakdown, construction and manufacturing fell by 28.7% year-over-year in the quarter ended in July (from -34.2% in June) and -21.0% (from  -29.6%), respectively, while mining stood at -4.5% (from -4.7%).

At the margin, IP recovered further in July driven by the manufacturing sector as distancing measures were eased. Using seasonally adjusted figures, IP expanded 6.9% month-over-month in July (from 17.9% in June), driven mainly by an expansion in the manufacturing sector of 11.0% (from 26.8%). Still, the quarter-over-quarter annualized growth rate (qoq/saar) of IP remained weak in July (-32.0%), with manufacturing, construction, and mining at -26.8%, -51.8% and -18.7%, respectively. 

We expect GDP for 2020 to fall by 10.7%. We expect a recovery over the rest of the year, supported mainly by the manufacturing sector (driven by a recovery in the U.S. economy). However, a modest fiscal stimulus and prevailing uncertainties over the domestic policy direction are likely to curb growth of internal demand. 

Julio Ruiz

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