Mexico’s industrial production to have remained flat in September, unlikely to recover in near future

Mexican industrial output continues to imply a sub-trend growth story. In the initial eight months of this year, the nation’s industrial production expanded at an average pace of 0.3 percent, and the rate dropped further to zero in the last four months. In all, the industrial production growth was just 0.3 percent year-on-year in August, in spite of the strongest manufacturing growth in the month since February.

In the last four months, Mexico’s mining sector mainly crude oil has negative contributed an average of 1.2 percentage points from the overall industrial production, meanwhile construction growth has also entered the negative territory.

Thus, the industrial production growth is almost flat in spite of sluggish pace in manufacturing growth. This trend is expected to have continued in September as well. According to a Societe Generale research report, Mexico’s industrial production growth is expected to have come in at -0.3 percent year-on-year.

Given the uncertain outlook of Mexico’s manufacturing due to weak trade figures, the Mexican industrial production is not expected to rebound in the near future. If the price of oil continues to remain low and if the mining sector investment continues to be weak, then the domestic sector would not be successful in raising the overall industrial production growth from the present weak levels unless manufacturing bolsters, stated Societe Generale.