Mexico Watch: industrial production tumbles, confidence soars
Industrial activity in Mexico decreased 0.6% in November compared to the previous month and registered a 1.3% year-on-year decline, statistics agency (INEGI) reported Friday.
The result presented a deep negative surprise to analysts, boding ill for 4Q18 economic growth.
Banorte's economic analysis team, which had called for a 0.5% increase in industrial production for November, blamed the disappointing data on an unexpected 1.9% month-on-month contraction in construction output (seasonally adjusted) in combination with the 2.3% m-o-m pullback in the mining sector (building to a 7.9% y-o-y decline).
"With these results, industrial production showed a decline of 1.5% 3-month-on-3-month at annualized rate, deteriorating for the second consecutive month," said Banorte in a note. "In this sense, the short-term dynamic has worsened in recent months, in line with our expectation of a slowdown in economic activity."
"November and October's dire data mean that, even if output rises by a strong 1.0% m/m in December, industry will probably contract by around 1% over Q4 as a whole, shaving around 0.2 percentage points off q-o-q growth," said Edward Glossop, Latin America economist for Capital Economics. "Moreover, the fuel shortages which began this year could disrupt activity in the first few months of this year. We still expect above-consensus GDP growth 3% this year, but the risks to our forecast lie to the downside."
The generation, transmission and distribution of electricity, water and gas supply by pipelines to the final consumer grew 1.4% compared to October, while manufacturing industries advanced 1.0% in November 2018 compared to the previous month, detailed INEGI.
Pictured: View of a gas station closed due to lack of fuel in Mexico City, on January 9, 2019. Mexico's president recently announced a joint plan with state-run oil company Pemex to tackle fuel theft from pipelines and within the company.
Consumer confidence soaring
Mexican consumers ended 2018 with the strongest levels of confidence about the nation's and their own present and future economic prospects since December 2006, a reflection of faith in the government of President Andrés Manuel López Obrador (AMLO) that could represent an economic boon moving forward.
INEGI reported Mexico's consumer confidence index for December on Thursday with the combined index at 43.8 units, a 6.6% increase over the November level and 23.4% higher than the index in December 2017 in seasonally adjusted terms.
The monthly gain was the largest since July, which featured AMLO's landslide electoral victory.
Last month's increase reversed the 2.6% drop observed in November compared to October, which was the highest of last year.
Although all the components of the confidence grew, the sub-index that had a greater upturn was the one that measures the perspective of the economic situation of the country in the next 12 months against the current one (+13.4% m-o-m), followed by the estimate for the expected economic situation of households for the next 12 months (+6.4% m-o-m).
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