MEXICO – Downside surprise in June’s industrial production

The global supply microchip disruption seems is still affecting the manufacturing sector.

Julio Ruiz


Industrial production (IP) grew 13.5% year over year in June, below our forecast (15.9%) and market expectations of 15.5% (as per Bloomberg). According to figures adjusted by working days, IP expanded at a similar pace (13.3% year over year, down from 36.4% in May as the favorable base effect due to strict social distancing measures a year ago fades away) and taking the quarterly annual rate to 27.5% in 2Q21 (from -1.8% in 1Q21). Looking at the breakdown, construction and manufacturing output quarterly annual rate stood at 33.5% in 2Q21 (from -6.7% in 1Q21) and 36.3% (from 0.5%), respectively, while mining output stood at 6.4% (from -1.6%).

Soft industrial production momentum in 2Q21. Using seasonally adjusted figures, IP fell by 0.5% month over month, taking the quarter-over-quarter annualized growth rate (qoq/saar) to -0.4% in 2Q21. Looking at the breakdown, using also qoq/saar figures, mining (-1.1%) and manufacturing (0.0%) output were the main drags to industrial activity in 2Q21, while construction sector stood at 2.6%. Within manufacturing output, the qoq/saar of computer & related (-6.2%) and transport equipment (-8.4%) production remained weak in 2Q21, suggesting the global supply microchip disruption is still affecting the vehicle manufacturing sector.

We expect GDP growth of 6.5% for 2021, supported by U.S. expansion and economic reopening. However, a further delay in the normalization of the global microchip supply is a downside risk to our outlook. The services sector will continue supporting the recovery during the rest of the year if mobility is not affected significantly by the resurgence of the outbreak.   

Julio Ruiz