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Industrial production in Mexico falls to its lowest level since 1996

In May, the second month of confinement, industrial production stood at 71.79 points, the lowest level since November 1996, with seasonally adjusted figures.

In its monthly variation, it presented a decrease of 1.85%, slowing down the sharp drop observed in April of 25.51 percent.

At an annual rate, industrial activity contracted 29.69%, accumulating 20 consecutive months of declines, showing that industrial production showed a decreasing trend, which has deepened with the arrival of the virus.

Inland, both mining and electric power production, construction and manufacturing continued to fall, although mostly at much lower rates than those observed the previous month.

Industrial production

Mining fell 2.99% monthly and -5.75% annually. In its breakdown, the decrease in mining of metallic and non-metallic minerals of 30.83% stands out, which fell to a magnitude very similar to that observed the previous month (-31.09 percent).

It is worth mentioning that the item of oil and gas extraction showed a monthly drop of 4.79 percent.

The aforementioned is related to the entry into force in May of the OPEC + agreement that implies a reduction of 100,000 barrels of daily production, as well as the reduction of personnel in some exploitation platforms in the Gulf of Mexico due to increases in the contagion of its workers.

The oil sector is expected to continue its downward trend for the remainder of the year due to the aforementioned factors and the effects generated by the cancellation of platform maintenance contracts by Pemex, as part of its austerity measures.

The generation, transmission and distribution of electrical energy decreased 10.15% monthly and 12.92% annual. The sector presented monthly falls in its two areas, of 12.50% in the transmission of electrical energy and 1.02% in the supply of water and gas, as a result of less social mobility that has caused less demand for these services.

Edification

Construction presented a drop of 1.34%, while at an annual rate it fell 35.87 percent.

Within the sector, construction registered the only advance in its three items, increasing 1.74% monthly, after registering the largest contraction in the sector during April (38.05 percent).

On the other hand, the construction of civil engineering works presented a 3.09% drop, despite the fact that it was benefited by the continuation of the priority projects (Santa Lucía, Tren Maya and Dos Bocas) and the increase of 48.4% in real annual physical investment spending by the federal government.

Manufacturing activity showed a 35.87% drop at the annual rate. On the other hand, it is worth noting the lower monthly contraction of the active manufacturing of 0.32% (vs. 30.59% in April), driven by the advance in the manufacture of textile products and transport equipment of 60.23% and 42.55% monthly, respectively.

In particular, the latter sector would be showing greater progress in June, as revealed by the June data for the automotive sector, where an increase in production was observed from 22,199 in May to 238,946 units in June.

Manufactures

In contrast, the largest monthly decreases were observed in the manufacture of electrical products and in the plastic and rubber industry, 13.51% and 11.44 percent.

The rest of manufacturing activities show more moderate progress.

Producción
Graphic: Banco Base.

However, the production of some goods continues to be affected by interruptions in supply chains.

It is worth mentioning that the IMEF manufacturing indicator also reveals an improvement in the sector for the sixth month of the year, increasing 4.4 points. However, it remains in the contraction zone, standing at 42.0 units.

Everything seems to indicate that Mexico’s industrial activity has already bottomed, but a weak recovery is expected, as sanitary measures still remain in the country and, in addition, the spike in contagion in the US compromises the recovery, particularly in the manufacturing sector.

 

Banco Base

 

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