Mexico | Manufacturing slowed down in August; outlook improves for 4Q23

Summary

The BBVA Multidimensional Manufacturing Indicator fell (-)0.9% YoY in August, bringing the average annual change of the first eight months of the year to 1.6%.

Key points

• Key points:
• According to INEGI figures, the textile manufacturing, computing equipment and transportation equipment segments recorded the largest drops in used capacity during July, a period in which only four of twenty-two subsectors of manufacturing activity showed positive variations.
• Although the demand for durable goods in the US has shown a slowdown in recent months, the government support programs for the industry that have been implemented in that country (IRA and CHIPS) have provided dynamism to production, which has improved the outlook for manufacturing activity in Mexico for the following months.
• Among the segments that have shown the greatest progress with respect to their pre-pandemic level are the manufacturing of petroleum derivatives (39% above their pre-COVID level), the machinery and equipment segment (+21%), and manufacturing of electrical appliances (+21%).
• We estimate the outlook improvement for the manufacturing sector in the US will have a favorable effect on its counterpart in Mexico, to which is added the positive perspective regarding the industrial relocation process (nearshoring) for the following years.

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