Mexico: Industrial production likely affected by twin earthquakes in September - SocGen

Analysts at Societe Generale, explain that after strong growth in 1Q17, Mexico’s manufacturing production has been growing at a steady pace, averaging 2.4% yoy between April and August.

Key Quotes

“While the pace of manufacturing expansion can’t be called impressive, this has been the key sector spurring overall industrial production and helping employment and consumption grow on the expenditure side. The mining sector remains a significant drag to IP, while construction and utilities have also declined this year (averaging -0.4% and -1.1% in the first eight months).”

“Given the recent trend in these components, the trade numbers and after taking into account some fallout from the earthquakes in September, we estimate industrial production to have declined 1.2% yoy in the final month of 3Q. On a seasonally-adjusted basis, IP likely declined 0.5% mom in September.”

“Looking ahead, we see the mining contraction subsiding beyond the next few months, leading to a lesser drag on overall IP, while trade with the US will likely continue to determine the trajectory of the manufacturing sector. In the near term, the disruptions to supply chains in the manufacturing sector due to damages caused by the recent earthquakes could continue to affect IP growth in 4Q17.”