Mexican Industrial Production: Not a good start for the last quarter - Wells Fargo

According to analysts from Wells Fargo, the strong improvement by mining output, up 4.7% sequentially, was not enough to prevent further weakening in industrial production in Mexico during October. They noted that manufacturing weakened for a second consecutive month. 

Key Quotes: 

“The Mexican industrial production index was down 0.1 percent sequentially in October, after a decline of 0.4 percent the previous month. On a yearearlier basis, not seasonally adjusted, industrial production was down 1.1 percent compared to a decline of 1.2 percent in September. The industrial production index was helped in October by a strong 4.7 percent increase in mining production on a sequential basis.”

“Perhaps the most disappointing news from the October industrial production release was what happened to manufacturing production. Manufacturing output declined 0.6 percent sequentially after a 0.2 percent decline in September.”

“The result of the October industrial production index is not a good start for the last quarter of the year. Out of all the industrial sectors only the manufacturing sector remained positive on a year-earlier basis. However, that sector has also slowed down considerably during the past several months.”

“This is not good news for the Mexican economy overall, as the ongoing uncertainty regarding the renegotiation of NAFTA with the United States and Canada is going to be compounded by the domestic political risks that are always present during a presidential campaign year. This will be especially true next year if the current front runner in all of the presidential polls, Andrés Manuel López Obrador (or AMLO), wins the election. Markets fear that AMLO, a populist from the left, could push his nationalist agenda and potentially set the country back several decades, even if he continues to argue that he will be a pro-business candidate as he says he was during his tenure as the mayor of Mexico City.”