Mexico: October IP data point to continued growth moderation into Q4.

Florencia Vazquez,Gustavo Arruda,Marcelo Carvalho,Nader Nazmi - Market Economics
Daily Latam Spotlight | 13 Dec 2012 06:00 |

Mexico: October IP data point to continued growth moderation into Q4.

MEXICO

October IP data signal continued moderation in activity. Industrial production expanded 3.6% y/y in October, exceeding September’s 2.4% rise and coming in slightly better than the consensus expectation of 3.4% and our 3.0% projections. The manufacturing sector’s growth accelerated to 5.0% y/y from 1.9% y/y in October.

On a seasonally adjusted basis, IP shrank 0.8% m/m (sa) in October, as construction activity contracted 1.2% m/m (sa), and manufacturing production declined 0.9% m/m. The drop in these two components, which together account for more than three-quarters of IP, more than offset higher output in the mining sector (0.2% m/m) and increased utility production (2.8% m/m).

October’s industrial production data provide further evidence that Q3 growth deceleration has continued into Q4. A moderation in manufacturing activity, which we have been expecting, is underway. This is consistent with our long-held 3.8% GDP growth projection for 2012.

Seasonally adjusted industrial production was stagnant in the three-month period ending October (0.2% q/q saar). Manufacturing output was down 4.0% (q/q saar) over the same period.

IP was 4.1% higher in the first 10 months of 2012 than in the year-ago period. Manufacturing output from January through October of this year was 4.9% above production in the same period in 2011.

Mining output was flat in October (-0.1% y/y) as a 2.1% y/y contraction in oil output offset a 7.1% y/y growth in non-oil production. Petroleum output declined 1.4% from January through October 2012 over the same period in 2011, underscoring the need to advance energy sector reforms.

Looking ahead, we see continued moderation in IP growth in Q4, reflecting more subdued US demand for Mexico’s manufactured output.

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