Mexico’s industrial production took an unexpected hit in March, driven by a decline in manufacturing output and a stark drop in mining activity as tighter financial conditions drag down Latin America’s second-largest economy.
(Bloomberg) — Mexico’s industrial production took an unexpected hit in March, driven by a decline in manufacturing output and a stark drop in mining activity as tighter financial conditions drag down Latin America’s second-largest economy.
Mexican industrial production declined 0.9% from February, below economists’ median forecast for a 0.1% contraction. Mining output dipped 3.5% in the monthly comparison while manufacturing slowed 1.1%. The likelihood of a US recession and high interest rates could hurt the sector and the overall economy over the course of 2023.
“Weak momentum at the end of Q1, combined with the impact of tight fiscal and monetary policy and a growing likelihood of a recession in the US, means that we expect Mexico’s economy to struggle over the rest of this year,” William Jackson, chief emerging markets economist at Capital Economics, wrote in a research note.
The mining sector’s slump followed a 4.1% jump that surprised analysts in February. Nationalist government policies and a proposed mining reform will continue to hit the sector, according to Bloomberg LatAm Economist Felipe Hernandez.
Manufacturing activity was one of the main drags after it fell for a second consecutive month to its lowest level in a year.
“We are expecting to see a much more widespread and forceful slowdown toward the end of this year,” Janneth Quiroz Zamora, vice president of economic research at Monex Casa de Bolsa, said, although she added that a recovery in the coming months is still possible.
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