Scotiabank:
A rebound in Mexico’s monthly fixed investment and consumption reflects the country’s post-pandemic recovery as the economy reopens and vaccination efforts progress. The statistical agency’s monthly data release is well in line with expectations of a sustained, albeit slow, improvement in investment.
Per data released by Mexico’s INEGI on June 7, gross fixed investment rose 14.4% in March from 4.6% y/y in February in real terms.
The surge in gross fixed investment was driven by base effects and the notable recovery of investment in machinery and equipment (from 2.3% y/y to 14.8% y/y) that offset a continued contraction in construction spending, from -6.9% y/y to -7.8% y/y
On a monthly basis, investment slightly cooled from 2.4% m/m to 2.3% m/m (non-seasonally adjusted); construction contracted from 2.8% m/m to -0.3% m/m; and machinery and equipment grew from 1.8% m/m to 3.0% m/m, likely relating to the overall rebound in manufactures.
Private consumption also posted a slow recovery in INEGI’s release, from -7.8% y/y in February to 0.4% y/y in March (chart 2), the first y/y increase since the pandemic, again benefitting from base effects. On NSA monthly basis, consumption rose from -0.4% m/m to 2.8% m/m. Imported goods came in strongly at 7.5% m/m from the previous -1.8% m/m. Domestic goods stood at -0.2% m/m, with no change from the February number. Services improved from 0.4% m/m to 2.8% m/m.
This annual rebound is based on a strong pace in imported goods, which accelerated from 2.1% y/y to 28.6% y/y. Domestic goods rebounded from -1.8% y/y to 0.6% y/y. However, services still show signs of weakness as it only improved from -14.6% y/y to -6.0% y/y, still in negative territory.
These results were expected, given the rebound in consumer goods imports and overall easing of COVID-19 restrictions. However, we maintain our outlook of a slow recovery in domestic consumption this year, which will gain pace as the vaccination process advance.
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