Industrial production (IP) contracted by 0.9% YoY in August, well below market consensus of +0.4%, and July’s 2.2% increase. Using seasonally adjusted data, IP fell by 0.5% MoM in August (+0.2% in July), mainly driven by an important monthly sequential contraction in construction (-3.7% MoM), while all other sectors had sequential gains (mining +0.1%, energy and water +1.4%, manufacturing at +0.3%). Looking deeper into the details of the disappointment in construction data during August, all sub-indices fell sequentially, but most of the decline was driven by edification, which has had a choppy rising trend for several months. Overall IP’s momentum measured on a QoQ saar basis decelerated at the margin from 3.3% in July to 2.3% in August, weighed down by construction and mining, while manufacturing accelerated slightly.
Our take: The disappointment in IP data during August is a payback from July’s positive surprise. As we had anticipated in previous months, the positive momentum of the construction sector during the first half of the year expectedly faded. The sequential improvement in manufacturing could reflect the depreciation of the currency since June, as well as better-than-expected activity in the U.S. The weakness in IP in 3Q24 poses headwinds for our quarterly GDP call, as the deterioration in business confidence, the fall in the imports of capital goods, and leading indicators more broadly may signal additional challenges for our 2025 GDP call of 1.3% (recently revised down from 1.5%). The INEGI will publish IP data for September on November 11, prior to Banxico’s next monetary policy meeting (November 14) in which we expect a 25 bp cut to 10.25%.
Andrés Pérez M.
