Itaú BBA - MEXICO – Upside industrial production surprise in October

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MEXICO – Upside industrial production surprise in October

December 11, 2020

Industrial production growth was driven by manufacturing output and construction

Industrial production (IP) surprised to the upside in October. IP stood at -3.3% year-over-year in October, above our forecast of -5.9% and market expectations of -5.5% (as per Bloomberg). According to figures adjusted by working days, IP contracted at a slightly slower pace (-3.0% year-over-year), taking the quarterly annual rate to -6.0% in October (from -8.8% in 3Q20). Construction and manufacturing output fell by 13.1% year-over-year in the quarter ended in October (from -17.8% in 3Q20) and -4.4% (from -7.1%), respectively, while mining stood at -2.5% (from -3.2%).

Industrial production is closer to pre-pandemic levels. Using seasonally adjusted figures, IP monthly growth rate accelerated in October to 2.0% month-over-month (from 0.6% in September), driven mainly by construction (3.6%) and manufacturing (1.8%) output. Industrial production is closer to pre-outbreak levels (4.4% down from February). Given the weak base of comparison, the quarter-over-quarter annualized growth rate (qoq/saar) of IP stood at 74.8% in October, supported mainly by manufacturing output (97.6%), while construction output and mining stood at 79.7% and 14.2%, respectively.


We expect GDP growth for 2020 and 2021 of -9.0% and 4.0%, respectively, supported mainly by the external demand. On the other hand, a modest fiscal stimulus and prevailing uncertainties over domestic micro policies are likely to curb internal demand growth. A retightening of social distancing measures amid the recent sharp increase in the outbreak is a short-term downside risk to our economic outlook.

Julio Ruiz

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