Mexican factory activity jumps back in August

Factory activity jumped back in August, confirming a recovery was in place, according to some economists.

Manufacturing output expanded at a 0.2% month-on-month clip, marking a fourth consecutive monthly increase and pushing the year-on-year pace of growth from -0.5% in the previous month to a gain of 3.7% (consensus: 1.5%), according to Mexico's statistics office, INEGI.

Total industrial production on the other hand dipped by 0.4% over the month, yet rose by 0.3% over the year (consensus: 1.0%) after having shrunk by 1.3% in July.

A large drop in mining output offset the better tone in manufacturing, falling at a seasonally adjusted rate of 1.7% month-on-month, alongside drops of 0.8% for total construction and 3.3% for public construction as budget cuts bite.

Utilities output registered a declined of 1.0% on the month.

"Overall, Mexican industrial activity is still weak, due mainly to the recession in the oil sector and soft construction activity, but the manufacturing sector is strengthening. Looking ahead, we expect manufacturing to build further momentum, thanks mainly to an improving US economy," said Andres Abadia, senior international economist at Pantheon Macroeconomics.