Mexico Industrial Output Unexpectedly Dropped in July (Update2)
Mexico Industrial Output Unexpectedly Dropped in July (Update2)
Mexico’s industrial production unexpectedly fell in July as Hurricane Emily forced state oil company Petroleos Mexicanos to scale back output.
Industrial output dropped 1.1 percent from the year-earlier period after increasing 0.7 percent in June, a government report showed. Economists had forecast an increase of 0.8 percent in July, according to the median of 11 estimates in a Bloomberg survey.
The hurricane, which reduced Pemex’s offshore oil output, added to a slowdown in Mexico’s economy that has come as demand from the U.S. has eased. Industrial output in Latin America’s biggest economy averaged 1.5 percent a month in the first half of the year, less than half the 4.2 percent average in the second half of 2004.
“It’s a weak number,'’ said Eduardo Torres, an economist with Banco Bilbao Vizcaya Argentaria SA’s Mexican unit.
Central bankers last month cut the benchmark lending rate a quarter percentage point from a 29-month high of 9.75 percent in a bid to bolster domestic consumer demand and help offset the slowdown in sales to the U.S., which buys 85 percent of Mexican exports.
“The economy is showing some signs of life as the central bank keeps things on an even keel,'’ said Aryam Vazquez, an economist at Informa Global Markets in New York. He predicted the central bank will cut the benchmark rate to 9 percent by year-end.
Oil Prices
The central bank cut its 2005 economic growth forecast to about 3 percent from as much as 3.75 percent on expectations that a surge in oil prices will curb U.S. growth, Deputy Governor Jesus Marcos Yacaman said Sept. 8 at a seminar in Mexico City. Record gasoline prices may hurt consumer confidence and economic expansion in U.S., he said.
Mexico’s economy grew 3.1 percent in the second quarter, failing to meet the government’s 4 percent estimate. The economy grew 2.4 percent in the first quarter, following growth of 4.4 percent in 2004.
Oil production at Pemex dropped 10 percent in July as it shut offshore oil platforms in the Campeche Sound, which account for 85 percent of crude output, on July 17 and didn’t return to full production until Aug. 22. Mexico, the world’s six-largest oil producer, registered output of 3.082 million barrels of oil per day in the month, its lowest monthly output in more than two years.
Mining, Manufacturing
Mining output shrank 1 percent in the month while manufacturing fell 2.1 percent, the government report showed. Construction rose 2.5 percent.
“One sector is supporting industry in Mexico: construction,'’ said Salvador Moreno, an economist with ING Groep NV, in a telephone interview from Mexico City. He was the only economist of the 11 in the Bloomberg survey to forecast a decline in output in July.
“Activity in the automotive sector as well as manufacturing exports was weak,'’ Moreno said.
Mexico’s auto production dropped 13.2 percent to 97,760 total vehicles in July as U.S. manufactures met demand by selling off existing inventory, Alejandro Werner, chief economist for the Finance Ministry, said at a news conference last month.
Werner predicted auto output, which accounts for 10 percent of Mexico’s industrial production, would strengthen in the second half as automakers ramp up output after plant expansions.
Ford Motor Co., the second-largest U.S. automaker, began exporting three new lines of cars from its plant in Hermosillo, Mexico on Aug. 10 after investing $1.2 billion in the plant to allow the production of up to 300,000 units a year, the government said.
Source: bloomberg.com
