Mexico: Weakness still alive in the industrial sector - Wells Fargo

Eugenio Aleman, senior economist at Wells Fargo, notes that weakness remains in the Mexico’s industrial sector, amid a recent increase by 0.3% on a month-over-month basis in the industrial production.

Key quotes

"The overall industrial sector in Mexico remained weak in May. Although industrial production increased 0.3 percent in May compared to April, the sector posted a year-over-year rate of 0.4 percent in May compared to a rate of 1.9 percent during the 12 months ended in April."

"Construction activity improved 0.2 percent, month over month, and 2.8 percent on a year-earlier basis, while the public utilities sector improved a strong 1.4 percent versus April, seasonally adjusted.

"The worst performing sector, once again, was the mining sector, which saw its output shrink 0.5 percent versus April and 4.7 percent versus May of last year. This is, perhaps, the worst news for the administration of President Peña Nieto, as the efforts to reform the country’s energy sector have still yet to produce any meaningful turn around in the sector."

"For now, we believe that the recent increase in interest rates will have a limited effect on this sector, but if the central bank decides to continue to increase the interest rate, this could be bad news for the construction sector going forward."