Itaú BBA - MEXICO – Gross fixed investment deteriorated further in May

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MEXICO – Gross fixed investment deteriorated further in May

agosto 6, 2019

Lingering uncertainties surrounding Mexico’s economy and transition effect will weight on investment outlook

Gross fixed investment (GFI) deteriorated further in May. The monthly GFI fell by 7.4% year-over-year in May (from -5.8% in April), above our forecast of -9.1% and market expectations (-8.0%, as per Bloomberg). Adjusting by working days, GFI grew at a similar rate in May, taking the quarterly growth rate to -5.3% (from -3.5% in April). Looking at the breakdown, also with calendar adjusted figures, construction investment fell by 5.2% year-over-year in the quarter ended in May (from -2.2% in April), dragged by both residential and non-residential construction investment, while Machinery & Equipment investment kept contracting (5.2%).

At the margin, GFI also weakened, dragged mainly by construction investment. With seasonally adjusted figures, the quarter-over-quarter annualized rate (qoq/saar) deteriorated sharply to -10.8% in May (from -3.3% in April). Within GFI, construction investment contracted 20.2% qoq/saar (from -8.5% in April), dragged by both residential and non-residential construction. Weak construction investment is partly associated to a delay in public investment expenditure execution (government transition effect) and fiscal austerity measures. In turn, Machinery & Equipment spending decelerated to 5.1% qoq/saar in May (from 8.2% in April).

We expect GFI to remain weak in 2019. Uncertainties over the direction of domestic policy and trade relations with the U.S. are expected to continue to weigh on investment outlook. Moreover, the government-transition effect and austerity measures pose further downside pressure on construction investment in the short-term.  


Julio Ruiz



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