Mexican capital investment falls victim to weak peso in October
Capital investment in Mexico fell in October, in part due to the depreciation in the country's currency.
Gross fixed investment declined 0.8% month-on-month following a 1.3% rise during the previous month, with total purchases of machinery and equipment plunging by 6.5% - the largest drop since February 2015.
In parallel, spending on imported machinery and transportation collapsed 11% over the month after growing 7% in September.
"The sharp MXN sell-off, which has pushed up prices for capital equipment, is to blame," Andres Abadia, Senior International Economist at Pantheon Macroeconomics said in a research report sent to clients.
Construction sector output increased 1.7% when compared against September, but Abadia expected the sector to come under renewed pressure in the fourth quarter as the government tightened its belt.
"Survey data indicate that falling public construction investment will remain the main drag on growth for the foreseeable future," the economist said.
Overall, the report is poor, confirming that investment started the quarter under severe pressure. Looking ahead, we expect more negative news to come, as investment likely will be hit by Trump-related fears, and the MXN’s sell-off.