- Mexico: Investment drops for the twelfth straight month while consumption weakness extends
Gross fixed investment deepened its annual real decline in August, falling from -6.6% to
-10.4%, marking twelve consecutive months of contraction. Within its components, machinery and equipment dropped more sharply, from -5.9% to -13.7%, continuing consecutive declines since January of this year, driven by a steeper fall in transportation equipment, in line with the slump observed in heavy vehicle sales. On the other hand, construction, which has shown consecutive decline since August of last year, maintained a decrease of -7.4% (vs. -7.2% previously), due to setbacks in non-residential construction (-17.9%), compared to the growth in residential construction (8.6%).
Thus, in the cumulative total for the first eight months of the year, investment shows an annual decline of -7.3%, stemming from weaknesses in machinery and equipment as well as non-residential construction. Looking ahead, we believe that domestic and international uncertainty, along with the contraction of public investment and adverse security conditions, will continue to weigh on investment decisions.
In August, private consumption remained practically stagnant, with an annual real variation of 0.1%, the same as the previous month. Nationally, consumption fell -0.3% year-on-year, mainly affected by decreases in durable goods (-5.3%) and semi-durable goods (-7.0%). In contrast, non-durable goods and services remained in positive territory, with moderate growth of 0.8% and 0.7%, respectively. Imported goods showed a sharp slowdown, growing only 0.8%, compared to 5.1% in July. This decline is largely explained by the contraction in semi-durable goods consumption (-4.7%).
As a result, consumption accumulates an annual real decrease of -0.3%, accentuated by the -3.1% drop in imported goods. In seasonally adjusted figures, consumption rose 0.6% month-on-month compared to July (0.1% previously), with generalized increases across its components. However, we estimate that in the coming months consumption will remain weak, influenced by factors such as the recent decline in remittances and moderation in formal job creation.
—Rodolfo Mitchell, Miguel Saldaña & Martha Cordova
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.