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Construction sector rebounded, while manufacturing output deteriorated
12/06/2023 | Julio Ruiz

Industrial production (IP) grew 3.9% yoy in May (from 0.7% in April), above our forecast of 2.8% and market expectations of 1.6% (as per Bloomberg). According calendar adjusted data, IP expanded at a slower pace (2.9%), taking the quarterly annual rate to 2.0% (from 2.3% in 1Q23). Looking at the breakdown, the quarterly annual rate for the construction sector expanded by 2.8% (from 2.0% in 1Q23), while manufacturing and mining sectors stood at 1.4% (from 2.4%) and 3.1% (from 1.7%), respectively.  


At the margin, industrial production expanded at a solid pace in May, but momentum remains soft. Using seasonally adjusted series, industrial production expanded 1.0% mom, driven by construction sector (7.2%), while manufacturing output fell by 1.4% consistent with a somewhat softer external scenario. We note engineering construction's solid growth, which is unlikely to persist in the coming figures, was mostly responsible for the strong expansion in the construction sector. The seasonally adjusted annualized quarter over quarter (qoq/saar) rate of industrial production stood at 0.6% in May (from 2.3% in 1Q23), with manufacturing output and construction sector at -0.1% (from 0.5%) and 4.9% (from 4.2%), respectively. 



Our GDP growth forecast for this year stands at 2.7%. After a likely still decent activity evolution in 1H23, we expect GDP growth to slow more clearly in 2H23 dragged by an expected slowdown in the U.S.