Industrial production (IP) rose by 3.3% YoY in February, broadly in line with our forecast of 3.5% and market expectations of 3.1% (as per Bloomberg). The annual figure was boosted by a favorable calendar base effect (leap year). In fact, using calendar adjusted figures, IP grew 1.4% YoY, taking the quarterly annual rate to 1.3% in February (from 3.0% in 4Q23). At the margin, IP fell by 0.1% MoM/SA, dragged by the construction sector (-2.5%), despite strong public capital expenditures, while manufacturing output grew at a decent 0.5%. Momentum in IP is weak, with the qoq/saar at -4.7% in February (from -1.3% in 4Q23).
Our take: Our GDP growth forecast of 2.8% for 2024 has a downside bias given a weak start of activity in the year. Soft activity, amid easing of core inflation, should give some comfort to Banxico to continue easing by 25-bp in the May monetary policy meeting. However, odds of a pause have increased, given a Fed repricing pointing to a delay in the beginning of the easing cycle.
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Julio Ruiz