Industrial production in Mexico was flat year-over-year in December. Industrial production is an important gauge of an overall economy since its driven by the consumer’s current demand and producers expectations of future demand. In Mexico, the National Institute for Statistics and Geography (INEGI) publishes a monthly report on the industrial output along with an industrial production index. INEGI’s index covers Mining (including oil), utilities, construction and manufacturing. Industrial production in Mexico maintained a consistent growth trend since mid 2009, but this month’s data confirmed a change in the trend.
The graph above shows the industrial production for Mexico. For much of 2012, Mexico’s industrial production expanded significantly, though late last Fall the trend changed. The December reading was actually 2% lower than November and flat vs. the previous year. A drop in the construction sector was the main culprit of the decrease, posting a 2.7% drop vs. November and a -5.0% drop vs. December of the previous year. It was following by a drop of 2.1% in mining, though mining overall was the only sector that posted a positive increase (2.4%) for December versus the previous year.
The data is very negative for investors in Mexican equities ETFs such as EWW or the locally traded NAFTRAC. It is alarming not only because of the negative growth, but mainly because of the confirmation of the change in trend. The graph clearly shows how the monthly growth rate slowed down until reaching zero in December. It will also affect investors in Latam ETFs such as GML or ILF, which hold approximately 25% of holdings in Mexican ETFs.