Modest growth in Mexico's IP set to continue

Mexico IP increased 0.2% m/m sa in July, mostly driven by construction activities and mining, which increased 1.5% and 0.5% m/m sa, respectively, partially offset by the decline in manufacturing (-0.5%). In annual terms, IP increased 0.7% y/y.

"We estimate that the GDP proxy of July will expand 0.4% m/m sa, mostly explained by a very strong import performance observed in that month (3.3%) and employment growth (0.4%). This should set the Q3 GDP tracker at 0.7% q/q sa, a bit better than our current forecast (0.4%)", says Barclays.

The contraction in manufacturing was mainly driven by production of transport equipment (cars) falling 5.4% m/m sa, which accounts for almost 25% of total manufacturing. These losses might be offset in August as car production increased 6.0% m/m sa, according to AMIA. However, oil production declined 2.2% in August, and there might be a reversal in construction, as it records two consecutive months of strong positive expansions. In that sense, industrial growth should remain very modest in the coming months and GDP growth should be driven by services.