Itaú BBA - MEXICO – Industrial production remained soft in April

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MEXICO – Industrial production remained soft in April

junio 11, 2019

Manufacturing output momentum improved somewhat

Industrial production (IP) kept contracting in April on a year-over-year basis. IP fell by 2.9% year-over-year in April (from -0.1% in March), above our forecast of -4.2% and below market expectations as per Bloomberg (-2.2%). The figure was dragged by the effect of Easter Holidays. According to figures adjusted by the number of working days, IP fell by a more modest 0.2% rate (from -2.5% in March), taking the three month moving average (3MMA) growth rate to -1.3% year-over-year (from -1.5%). Looking at the breakdown, also using calendar adjusted figures, mining sector kept contracting in the quarter (-8.6%, from -10.3%), while construction output deteriorated (-2.7%, from -1.9%). In turn, manufacturing output improved to 1.1% (from 0.5% in March).

At the margin, industrial production also improved, but momentum remained soft. With seasonally adjusted figures, industrial production grew 1.5% month-over-month in April (from -1.2% in March), taking the quarter-over-quarter annualized growth rate (qoq/saar) to 0.4% (from -0.7% in March). Within industrial production, mining output (-2.8% qoq/saar in the quarter ended in April, from -3.6% March) kept contracting, while manufacturing output (2.4% qoq/saar, from 1.6%) improved. In contrast, construction contracted 3.4% qoq/saar in the quarter ended in April (from 4.4% in March), although we note that the month-over-month growth rate was positive in April (2.2%).

We expect economic activity to remain weak this year. Uncertainty over the direction of domestic policy and trade relations with the US, weaker U.S. economic growth will likely keep growth below potential. In the short term, lower public spending is also playing against activity.  
 

Julio Ruiz



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