Mexico’s industrial production growth likely accelerated a bit in February

Mexico’s industrial production growth decelerated further in the fourth quarter of 2015 after gloomy performance in the first nine months of the year. In 2015 as a whole, Mexico’s industrial output expanded 1%, as compared with the growth of 2.6% in 2014. But industrial production grew 1% y/y in January, marking the most solid pace of growth in four months. A surprised growth in construction activities drove the growth.

Even though the construction sector is likely to have reversed the gain in February, the incoming numbers from the US indicate a rebound in Mexico’s manufacturing, according to Societe Generale.

“We expect manufacturing growth to reach its strongest level in five months in February (at 2.5% yoy), leading to a mild acceleration in IP growth to 1.3% yoy (-0.2% mom)”, noted Societe Generale.

Moreover, in January, the contraction pace in mining sector dropped to -2.5% y/y from December’s -4.8%. If the mining growth pace rebounds further in 2016, industrial output can grow stronger in 2016 as compared to 2015, added Societe Generale.

“This could eventually add some upside risk to our 2016 growth forecast of 2.4%, although we expect service sector growth to slow this year following a sharp surge in 2015 driven by demand for services on low inflation”, said Societe Generale.