Mexico | Manufacturing lost dynamism in 3Q23; outlook improves for the end of the year

The BBVA Multidimensional Manufacturing Indicator fell (-)2.0% in September, bringing the average annual variation of the first nine months of the year to 1.0% (vs. 4.9% in the same period of the previous year).

Key points

• Key points:
• According to INEGI data, the manufacturing of petroleum products, non-metallic mineral products, and the beverage and tobacco industry recorded the largest drops in capacity utilization during August.
• Although the IMM BBVA estimate for September points to a (-)0.6% QoQ drop in the sector's production in 3Q23, the leading indicators of manufacturing activity in the US anticipate a better performance of the sector going forward, given the government support programs to the industry in that country (IRA and CHIPS) and the resilience of domestic demand.
• The subsectors whose production is still well below their pre-pandemic level are the wood industry (-11.8%), clothing manufacturing (-11.7%), and the manufacturing of textile products and inputs (- 10.7% and -8.2%, respectively).
• We anticipate the better outlook for manufacturing activity in the US (given the resilience of its demand for durable goods and the government support to the industry) will have a favorable effect on the manufacturing sector in Mexico; added to the aforementioned factors is the expectation of relocation of production in global value chains in the coming years (nearshoring).

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