Mexico Industrial Production Falls for 1st Month Since ’09Eric Martin
Mexico’s industrial production unexpectedly fell in December from the year earlier for the first time in three years. The peso weakened on speculation the central bank is more likely to reduce borrowing costs.
Industrial output fell an annual 1.1 percent, the first decline since November 2009, the national statistics institute, known as Inegi, reported today on its website. The median estimate of 12 economists surveyed by Bloomberg was for growth of 2 percent. Construction shrank 5 percent and manufacturing slid 0.9 percent from the year earlier.
The decline was driven in part by concern the U.S., Mexico’s top trade partner, would fail to avoid $600 billion in automatic spending cuts and tax increases, said Rafael Camarena, an economist at Grupo Financiero Santander Mexico SAB. Congress passed a deal on Jan. 1 to avoid most of the so-called fiscal cliff. While more recent automobile production figures have signaled a pickup in manufacturing, today’s report increases the odds the central bank will cut interest rates, Camarena said.
“It seems the drop in manufacturing production was associated with the uncertainty in the United States,” Camarena said in a telephone interview. “This data supports the view that the central bank will cut interest rates. We think there’s a high probability.”
On a monthly basis, industrial production dropped 2.1 percent in December from November, the most since May 2009, as construction shrank 2.7 percent and manufacturing contracted 1.1 percent.
The peso weakened 0.5 percent to 12.7893 per U.S. dollar at 9:15 a.m. Mexico City time today.
Mexico’s automobile industry association said on Feb. 7 that production of cars and light trucks increased 19.8 percent in January from the year earlier.