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Soft external demand is affecting industrial production

Industrial production (IP) grew 1.6% yoy in March (from 3.3% in February), below both our forecast of 3.0% and market expectations of 2.7% (as per Bloomberg). According to figures adjusted by working days, IP expanded at a slightly slower pace (1.5%), taking the 1Q23 annual rate to 2.4% (from 3.2% in 4Q22). Looking at the breakdown, the 1Q23 annual rate for construction sector stood at 2.2% (from 2.1% in 4Q22), while manufacturing and mining sectors stood at 2.4% (from 4.6%) and 1.7% (from 0.3%), respectively.  


Soft external demand is affecting industrial production. Using seasonally adjusted figures, IP fell by 0.9% mom in March dragged by manufacturing output (-1.1%), while mining production fell by 3.5% (normalizing after growing at a strong 3.9% in February) likely associated to statistical volatility. In contrast, construction output grew 1.3% mom. The seasonally adjusted annualized quarter over quarter (qoq/saar) rate of industrial production stood at 1.9% in 1Q23 (from 2.2% in 4Q22), with manufacturing output and construction sector at -0.5% (from -1.8%) and 2.9% (from 10.6%), respectively. 



Our GDP growth forecast for this year stands at 2.4%. In our view, the economy will cool down in the last three quarters of this year, slowed by a softer U.S. economy, after still-decent GDP growth in 1Q23.


Julio Ruiz