MEXICO – Industrial production improved in July

Sectors affected by the global microchip supply disruption showed some recovery

Julio Ruiz


Industrial production (IP) grew 7.3% year over year in July, above our forecast (6.1%) and broadly in line with market expectations of 7.2% (as per Bloomberg). According to figures adjusted by working days, IP expanded at a faster pace (7.7% year over year, down from 13.3% in June as the favorable base effect due to strict social distancing measures a year ago fades away) and taking the quarterly annual rate to 18.0% in July (from 27.9% in 2Q21). Looking at the breakdown, construction and manufacturing output quarterly annual rate stood at 23.8% in July (from 33.4% in 2Q21) and 21.6% (from 36.8%), respectively, while mining output stood at 5.7% (from 6.4%).

At the margin, industrial production improved in July, but momentum remained soft.  Using seasonally adjusted figures, IP posted a solid growth of 1.1% month over month in July driven mainly by manufacturing output (1.4%), while construction output stood at 0.6%. Within manufacturing output, sectors affected by the global microchip supply disruption show some recovery (machinery & equipment: 0.2%, computer & related: 0.1%, electrical appliances 5.9%, transport equipment: 0.6%). The quarter over quarter seasonally annualized growth rate of industrial production stood at a soft -0.5% in July, with manufacturing, construction and mining output at 1.4%, 0.3% and -2.8%, respectively.

We expect GDP growth of 6.5% for 2021. However, activity risks are biased to the downside due to some impact from the re-tightening of social distancing measures (due to the third COVID wave in 3Q21) and the global microchip supply disruptions affecting mainly vehicle manufacturing. While manufacturing sectors affected by the supply shock displayed some recovery in July, activity indicators from August show vehicle production deteriorated further.

Julio Ruiz