Mexico Flash. Lower than expected industrial production contracted

Economic Analysis
October 12, 2012
Mexico Flash
Lower than expected industrial production contracted (-) 0.8%
mom in July (3.8% yoy). Highlights falls in construction and
manufacturing components.
The dynamics of the industry was worse than expected (expected BBVA Research: 0.0% 0.8% observed m / m), linked to the worsen external demand.
Particularly strong were the falls in the construction industry (-) 1.9% mom and
manufacturing (-) 0.9% mom., 3.1% and 4.3% respectively in terms of seasonally adjusted
annual growth.
The dynamics of the industry in August is consistent with growth in activity somewhat lower
than the second quarter, and close to 0.6% per quarter.
Lower than expected industrial production contracted (-) 0.8% in August. With this result, in terms of
annual growth rates in the industry growth was 3.8% and the moderation profile of the trend series is
confirmed. In 2Q12, average monthly expansion in the industry trend was 0.4%, while in the two months
July-August average growth was 0.1%.
For components of the industry, in accordance of moderation in U.S. production, Mexican manufacturing had
a contraction of (-) 0.9%, the third lowest of the year. In August, in contrast to what was observed in the
second quarter, key manufacturing industries such as transportation equipment had a fall of (-)3.5% mom,
and the branch is responsible for 0.5 pts of the 0.9 drop in manufactures. Recall that the automotive industry
is particularly relevant as its value added accounts for about 20% of manufactures, meanwhile about 80% of
automobile production is destined for export mainly to United States, so that their relationship to the outer
loop is very narrow. The other branches of production with strong ties to foreign demand (correlation greater
than 0.6%) also resented the fall in the outer loop, so that in August this set of branches are responsible for
the decline in manufacturing.
Meanwhile, the construction industry had a monthly contraction of (-)1.9% mom (3.1% yoy) mainly due to the
building component (-)2.9% mom (3.3% yoy). Remember that based on data from the National Survey of
Construction Companies, until the second quarter, the contribution of the public component in the growth of
the construction value in real terms was particularly important.
The short-term information available to Q3 suggests that growth will be more moderate than in the second
quarter of the year, both indicators form producer side (U.S. ISM, industrial employment, producer
confidence) and internal demand side (consumer confidence, real wages) point to moderation. Thus, we
maintain the GDP growth forecast of 3.7% for the year.
Graph 1
Graph 2
Industrial production, trend
(y/y%)
Manufactures & components, quarterly average m/m% and
July m/m%
0.0
0.0
-2.0
-0.2
-0.2
-4.0
-0.4
-0.4
-6.0
abr-12
oct-11
jun-10
Industry, Mexico
Ago-12
0.2
jun-12
0.2
ago-12
2.0
feb-12
0.4
dic-11
0.4
jun-11
4.0
ago-11
0.6
feb-11
0.6
abr-11
6.0
dic-10
0.8
oct-10
0.8
ago-10
8.0
feb-10
1.0
abr-10
1.0
Prendas
Computat.
Equip.
Chemical Ind.
Basic Metal
Non metal
Minerals
Mach. &
Transport.
Equipement Beverages
Equip.
0.0
Food
Metalic Prod..
-8.0
-6.0
Industry, USA
-4.0
-2.0
0.0
2.0
4.0
6.0
2Q12
Source: BBVA Research
Source: BBVA Research
Graph 3
Graph 4
Industrial Production & Contributions (m/m%)
Industrial production & employment (m/m%)
2.0
2.0
1.5
1.5
1.0
1.0
1.2
0.4
1.0
0.3
0.8
0.5
0.5
0.0
0.0
-0.5
-0.5
-1.0
-1.0
0.6
0.2
0.4
0.1
Minning
Electricity, gas & water
Construction
Manufactures
Industry Employment (lhs.)
jun-12
ago-12
feb-12
abr-12
dic-11
oct-11
jun-11
ago-11
abr-11
feb-11
dic-10
oct-10
ago-10
0.0
jun-10
-1.5
abr-10
jul-12
ago-12
jun-12
may-12
abr-12
feb-12
mar-12
ene-12
dic-11
nov-11
oct-11
sep-11
ago-11
jul-11
abr-11
may-11
mar-11
feb-11
ene-11
-1.5
jun-11
0.2
0.0
Industrial Production
Industrial Production
Source: BBVA Research
Source: BBVA Research
Cecilia Posadas
[email protected]
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