- Mexico: In July, gross fixed investment continues to decline; Private consumption slows despite greater momentum in imported goods
MEXICO: IN JULY, GROSS FIXED INVESTMENT CONTINUES TO DECLINE
In July, gross fixed investment surprised positively by recording an annual decline of -6.6%, smaller than the -7.3% y/y contraction anticipated by analysts, although slightly higher than the previous month, marking eleven consecutive months of declines (chart 1). Breaking down the components, the -7.2% drop in construction stands out, significantly deeper than the -3.2% in the previous month, with non-residential construction leading the decline by falling -17.2%, compared to -13.7% previously.
Meanwhile, investment in machinery and equipment contracted -5.9%, showing an improvement from the -9.7% in the prior month. Within this category, transportation equipment was the most affected component, with a drop of -15.5%. By sector, the sharp -22.7% contraction in public investment is notable, where public construction continues to show weakness, registering a decline of over -30% for the third consecutive month, standing at -31.7%. We believe that gross fixed investment will keep declining due to the uncertain domestic economic outlook.
PRIVATE CONSUMPTION SLOWS IN JULY DESPITE GREATER MOMENTUM IN IMPORTED GOODS
In July, private consumption slowed (chart 2), showing a real annual increase of just 0.1% compared to 1.6% y/y previously. Within this, imported goods showed the greatest dynamism, despite moderating from 8.2% to 5.1%, mainly due to a double-digit increase in non-durable goods (10.7%), while durable goods stagnated. In contrast, consumption of domestic goods and services fell -0.7%; particularly, services moderated from 1.7% to 0.7%, while goods deepened their decline from -0.4% to -2.0%. Within this decrease, durable goods showed the greatest deterioration at -7.9%, followed by non-durable goods (-1.4%) and semi-durable goods (-0.7%).
Thus, private consumption carries a cumulative real annual decline of -0.4% YTD in the first seven months of the year, mainly due to setbacks in both imported and domestic goods. On a sequential monthly comparison, consumption fell -0.1% m/m (1.1% previously) with seasonally adjusted figures. Looking ahead, we believe consumption will continue to show signs of weakness, negatively affected by stagnation in job creation and the decline in remittances observed in recent months.
—Rodolfo Mitchell & Miguel Saldaña
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