Mexican Industrial Output Unexpectedly Contracted in August

Mexican industrial production unexpectedly fell in August from the year earlier, dropping for a fourth straight month as construction contracted.

Output declined 0.7 percent, the national statistics institute said on its website today, compared with the median estimate for a 0.1 percent expansion from 16 economists surveyed by Bloomberg. Construction tumbled 5.1 percent and mining output dropped 2.2 percent. Manufacturing increased 1.6 percent, more than the 1.5 percent median forecast.

The government has cut its forecast for 2013 growth three times this year, to 1.7 percent from 3.5 percent, after the economy in the first half expanded the least since 2009 as exports stagnated and public spending fell. All 24 economists in a survey released by Citigroup Inc.’s Banamex unit this week expect the bank to reduce borrowing costs again by year-end after the weakness continued and hurricanes last month decimated crops, disrupted deliveries and emptied hotels.

“The trend in construction continues to look dismal,” Enrique Alvarez, the head of Latin America fixed income at IdeaGlobal, said in a phone interview. “Banxico is going to have to cut rates again before year-end. This report supports the overall necessity for more stimulus from monetary policy.”

The peso briefly dropped after the report before rising 0.2 percent to 13.0744 at 10 a.m. in Mexico City.

Policy makers surprised analysts by cutting the benchmark interest rate for a second time this year on Sept. 6, pushing it to a record-low 3.75 percent, saying the economy suffered an unexpected slowdown in the second quarter.

Production expanded 0.5 percent in August from July, the agency said, more than the 0.1 percent median estimate.

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