Q1 contraction adds downside risks to Mexican economy

Industrial production remained flat in March, mostly driven by a recovery in the construction activities (3.0% m/m sa) offset by monthly contractions in manufacturing (-1.0%) and mining output (-1.6%). In annual terms IP grew 1.7%. All in, IP contracted 0.2% 3m/3m saar in Q1.

After this report, GDP proxy of March will likely expand only 0.1% m/m sa, setting our GDP tracker just in line with our current forecast of 0.3 q/q sa in Q1, and consistent with an annual growth of 2.6% y/y, said Barclays. However, IP contracted in this quarter, increasing the risk of an overall contraction in the economy as a whole.

"After a soft Q1, we expect economic activity to rebound in Q2 as the US economy also strengthens and the electoral spending boosts services. However, we still believe that oil and construction will remain a drag during the rest of the year and only stronger manufacturing should support better IP numbers in the coming months." said Barclays