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News Article

Construction Investment Increased by 5.2 percent in March

By Fernando Mares | Wed, 06/08/2022 - 18:49

Productive investment in the construction sector grew in March 2022, surpassing the levels of the month before. The increase is driven by a growing number of construction projects, especially key federal infrastructure projects, as well as a general economic reactivation. Although this is a positive indicator, experts say there is still an investment lag in comparison with previous years. 

INEGI reported a growth of 2.8 percent in the Monthly Indicator of Gross Fixed Investment in March compared to February, which presented a drop of 2.2 percent compared to Jan. 2021. Experts say that there are no conditions to maintain this growth, but they do foresee a steady growth at a slower pace. “[The government] has not announced projects to change the downward trend. By contrast, rises in the interest rate will limit the growth of investment, particularly in the construction sector,” said Carlos González, Director for Economic Analysis, MONEX.

When comparing Mar. 2022 numbers with the pre-pandemic levels of Feb. 2020, investment recovered by 0.24 percent, but when compared with Mexico’s historic high of Sept. 2015, investment dropped by 13 percent.

According to INEGI, the results of March are driven by an increase in construction expenditure, which increased by over 5.2 percent. Conversely, investment in machinery and equipment dropped by 1.3 percent. Year-over-year, the Gross fixed capital formation increased by 4.1 percent. 

“This rebound in investment is explained by a greater dynamism coming from the non-residential construction sector, especially at the current administration’s key projects, such as the Mayan Train and Dos Bocas Refinery… it is possible that the recovery will continue, but slowly, just like other decelerated sectors recover,” said Víctor Ceja, Head of Economic Research, VALMEX.

According to Jacobo Rodríguez, Finance Analisis, Black Wallstreet Capital, the results for March are full of contrasts, since they are lower than those registered in 2017 and 2018. This can be explained by the government’s rhetoric, which has caused the cancellation of contracts and projects in strategic sectors, resulting in the loss of confidence of investors. 

In March, Francisco Solares, President, the Mexican Chamber of the Construction Industry (CMIC) announced that the sector could grow by 6 percent in 2022. He said this growth could heighten the confidence of the private sector. 

In April 2022, CMIC’s Economic Studies Center stated that the construction sector reported profits of over US$664 million in 2021, which represents a decrease of 26 percent in comparison with 2022’s results. It also reported that the works the public sector contracted dropped by 55 percent.
 

The data used in this article was sourced from:  
MBN, El Financiero
Photo by:   Sean Pollock
Fernando Mares Fernando Mares Junior Journalist and Industry Analyst