Mexico’s industrial activity deepened its decline in July of this year, amid a further deterioration in the construction and manufacturing sectors. Analysts predict that the decline will continue in the coming months.
The Monthly Industrial Activity Indicator contracted 2.8 percent annually, marking five consecutive months of decline and its worst performance since January of this year.
According to data from INEGI (National Institute of Statistics and Geography), the construction industry saw a 4.1 percent annual decline, driven by a 22.3 percent drop in civil engineering projects, while construction reported a growth of just 0.5 percent.
The manufacturing industry declined 1.8 percent, the most negative figure since September 2020. Within this sector, the sharp 7.8 percent contraction in transportation equipment manufacturing stood out, the most severe since 2021.
Mining registered a 5.9 percent annual decline, slightly better than the previous month’s 8.1 percent contraction; however, it marks a 25-month streak of declines.
Meanwhile, the generation, transmission, distribution, and sale of electricity, water supply, and natural gas pipelines to the final consumer registered a 3.7 percent annual decline, marking six months of decline.
On a monthly basis, industry declined 1.2 percent and recorded two months of decline, with manufacturing declining by 1.6 percent, construction by 1.2 percent, and public services by 0.1 percent.
For Luis Adrián Muñíz, deputy director of analysis at Vector, the industrial production figures for July were poor and even worse than expected.
“The surprising decline in the local manufacturing sector is worrying. Based on the July data, we cannot rule out a decline in the Mexican economy during that period, which would represent bad news in terms of growth at the beginning of the second half of 2025,” he indicated.
Unfavorable Outlook for Industrial Activity Due to the Pace of Construction
For Alberto Ramos, chief economist for Latin America at Goldman Sachs, industry will face significant challenges in the coming months, especially in construction. “The outlook for industrial activity remains challenging. A slow pace of construction is expected, as the Sheinbaum administration has not yet embarked on a path of fiscal consolidation.”
He added that cost pressures, still-restrictive domestic financial conditions, political uncertainty, weak business confidence and external demand, coupled with frictions and tariffs on exports to the US, will negatively affect the industry in general in the short term.
Banamex analysts expect manufacturing to remain relatively stagnant going forward, given its link to activity in the US.
“Likewise, we expect the slowdown in construction to continue, given the reduction in public investment in real terms expected this year, in addition to the weakening investment expectations in light of US trade policy. For the full year, they estimate a 1.0 percent decline in manufacturing.
Industrial Growth Engines Are Shut Down
Alejandro Gómez Tamez, general director of the Grupo de Asesores en Economía y Administración Pública (GAEAP), noted that so far this year, industrial growth engines have been shut down, which is evidence of a poor outlook, with a 1.5 percent contraction in the industry as a whole between January and July.
He emphasized that, if we review some sectors, we discover that weakness is a common denominator that, due to various factors, has affected every branch, such as public services.
“Electricity, gas, and water should be a sector that always grows given the growing population; however, it has been declining due to lower industrial demand,” Gómez explained. He noted that one of the most important factors that has pushed down industrial demand is public sector construction.
Source: elfinanciero
