Industry lights flashing lights in August

Although the overall figure is one of stagnation, the vast majority of components contracted, which makes us think that future revisions will adjust the figure downwards”.

Marcos Arias, Analyst of the Monex Financial Group

Economic activity accumulates warnings of what is emerging as an imminent loss of dynamism in the second part of 2022. In this trend, the country’s industrial activity had a slight monthly decline of 0.04% in August, after a five-month streak of advances , according to figures released yesterday, October 12, Wednesday by the National Institute of Geography and Statistics (Inegi).

For practical purposes it is a stagnation but, seen in detail, the indicator reflects the weakness of most of its components, since of a total of 29 sub-branches of activity measured by the Inegi in its Monthly Indicator of Industrial Activity (IMAI ), 21 had setbacks.

The highest was observed in the line of machinery and equipment manufacturing, corresponding to the manufacturing branch, with a decrease of 12.5 percent.

It was followed by the wood industry (-3.9), beverages and tobacco (-3.5%) and, corresponding to the construction branch, the sub-branch of civil engineering works (-3.2%); the top five falls are completed by the textile manufacturing industry (except clothing), with a decline of 2.5 percent.

By sectors of activity and in ascending order, the greatest variations were those of construction (-1.7%), public services (electricity, gas and water, -1.7%), manufacturing (-0.1%) and mining (0.4 percent).

“The data reinforces the notion that has arisen as a result of the publication of other indicators that the economy has lost momentum in recent months. In fact, although the general figure is one of stagnation, the vast majority of the components contracted, which makes us think that future revisions will adjust the figure downwards and that the deterioration in the growth trend will be more noticeable during September” Marcos Arias, an analyst at Grupo Financiero Monex, said in a report.

In July the two most important internal engines for economic growth, private consumption and gross fixed investment, already showed signs of exhaustion. In the first case, two months of stagnation were spun that have prevented it from returning to its last peak level (May), while gross fixed investment fell 1.4% and stood 2.6% below its last peak, observed last April.

At the same time, merchandise exports, the other great –external– engine of the Mexican economy, spun two months in August with drops at the margin (-0.4% in July and -0.9% in August).

Also in the eighth month of the year, the leading indicators reported by the Mexican Institute of Finance Executives (IMEF) showed reductions that were interpreted by the organization as a sign that the Mexican economy was entering a “dark phase”.

Pre-pandemic contrast

In its annual comparison, industrial activity was 3% higher in August and during the first eight months of the year it accumulates a rise of 3.2%; however, if this accumulated is contrasted against the first eight months of 2019, prior to the pandemic, a decline persists, of 1.5% in this case.

Compared to the pre-pandemic period, construction is the sector that lags behind the most, with a drop of 14%, followed by public services (-2.5 percent). Meanwhile, mining has an advance of 3% and manufacturing -the sector with the greatest weight in the indicator-, a positive differential of 2.5 percent.

“Although some obstructions in the supply chains could continue to ease, we believe that the main challenges for the activity arise on the spending side (consumption, investment, exports), which we expect will cool down in the face of high inflation, higher financial costs and growing economic uncertainty,” said Ángel Huerta, an analyst at Grupo Financiero Ve por Más.

octavio.amador@eleconomista.mx