Itaú BBA - MEXICO – Industrial production recovered softly in January

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MEXICO – Industrial production recovered softly in January

Março 13, 2020

Coronavirus outbreak pose downside risks to industrial production outlook

Industrial production (IP) was broadly in line with market expectations in November. IP fell by 1.6% year-over-year in January, slightly above our forecast of -1.8% and broadly in line with market expectations as per Bloomberg (-1.5%). According to figures adjusted by working days, IP contracted at a slightly faster pace (1.7% year-over-year in January, from -1.1% in December), taking the quarterly annual growth rate to -1.6% in January (from -2.1% in December). Looking at the breakdown, mining improved in the quarter ended in January (2.4% year-over-year in January, from -0.4% in December), while construction sector improved slightly, but kept contracting (-5.7%, from -6.1%). Meanwhile, the quarterly annual rate of manufacturing output stood at -1.5% in January (from -1.5% in December).  

At the margin, IP improved softly in January. Using seasonally adjusted figures, IP increased 0.3% month-over-month (from -0.2% in December), taking the quarter-over-quarter annualized growth rate (qoq/saar) to -1.7% in January (from -5.0% in December). Within IP, mining output expanded 7.1% qoq/saar in January (from 3.9% in December), as oil output performs better. Likewise, construction output recovered to 1.2% qoq/saar in January (from -4.2% in December), driven by construction works, while engineering construction (more closely associated to capital public expenditure) remained soft. Finally, while manufacturing output recovered to -4.0% qoq/saar in January (from -8.0% in December), the coronavirus outbreak impact in the global supply chains could drag Mexico’s manufacturing output in the next prints.

Our 0.7% growth forecast for this year has a downside bias, due to the impact of coronavirus outbreak on the global economy. A soft recovery from last year would be supported by the fading effect of the government transition effect on fiscal spending and lower uncertainty after the approval of the USMCA in the U.S. Congress (still, domestic uncertainties will likely act to curb growth).


Julio Ruiz


 



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