Mexican industrial production seems to have shrunk again in October, medium-term outlook flat

Mexico’s industrial production is expected to have shrunk again in October. The industrial output disappointed in the third quarter after recorded a modest rebound in the June quarter, as the contraction in mining accelerated and construction growth stalled. In the third quarter, manufacturing growth was not much different from the average seen in the first half of 2016. But it has been timid on declining U.S. industrial production growth and the resulting effect on supply chains.

This situation is expected to continue in the near term. According to Societe Generale research report, the industrial production is likely to have contracted 0.8 percent year-on-year in October, while it is expected to have shrunk 0.1 percent in sequential terms. Meanwhile, manufacturing is expected to have grown 1 percent year-on-year.

Given the ambiguity on the U.S. trade policy currently, the medium-term industrial production outlook for Mexico continues to be flat, as the rebounded demand growth in the U.S. would slightly offset the negative confidence because of the estimated changes to trade policies. However, if the price of oil remains low and investment in the mining sector continues to be sluggish, the Mexican domestic sector is unlikely to lift the overall industrial production growth from the current muted levels unless manufacturing bolsters, added Societe Generale.