Industrial Sector Might Face Bumpy Road: BanorteBy Sofía Hanna | Wed, 08/18/2021 - 20:11
Mexico’s industrial production faced a challenging June, with troubles ranging from supply disruptions to the growth of COVID-19 cases. This points towards a stagnation of Mexico’s economic recovery, warn analysts from Banorte, which could continue throughout the rest of the year.
With seasonally adjusted figures, activity in June 2021 grew by 13.6 percent year over year. But, the Mexican bank’s figures point that the positive effect that had been seen in previous months is beginning to fade. In sequential terms, industry fell 0.5 percent month-over-month, reports Banorte, with generalized losses that were strongest in construction (-2.0 percent) and mining (-0.8 percent). “In our opinion, the industry has stagnated after having led the recovery since the reopening began. This is due to problems in supply chains, which could be spreading beyond manufacturing, and likely distortions due to the recent rebound in COVID-19 cases, among other factors,” reads Banorte’s monthly report.
Performance is expected to decline as the industry fell 0.5 percent month over month, adding to the deterioration in global virus conditions since the end of May that have exacerbated to this day, when Mexico reported a total of 28,953 cases in 24 hours. Activity is 3.4 percent below the level of February 2020, before the pandemic. Construction was the weakest sector falling by 2.0 percent and erasing the 1.5 percent growth of the previous month. Mining fell by 0.8 percent after two months of gains. Finally, manufacturing fell by only 0.1 percent, but this is its third consecutive month in contraction.
The COVID-19 pandemic will continue affecting Mexico’s economic recovery, but that is not the only concern. “As we have said before, the most relevant risk follows the effect of shocks to supply chains, more important for manufacturing. Among them, the lack of semiconductors has attracted the most attention and there still appears to be some time to be resolved. According to the CEO of one of the major auto chip makers, the shortage is expected to extend into 2022, especially as the industry becomes more skewed toward electric car production,” writes Banorte.