Mexican Industry Beats Expectations Helped by Nearshoring Boom

Mexico’s industrial production beat expectations in May led by the construction sector, as the “nearshoring” trend boosts demand for infrastructure.

Industrial output rose 1% from April, compared to the 0% forecast by economists surveyed by Bloomberg. Construction grew 7.2% over the same period, while manufacturing contracted 1.4%.

In recent years, investment in Mexico has been lifted by nearshoring, which involves companies relocating some operations from Asia to be closer the US market. That’s triggered a surge in public works spending and increased demand for industrial parks and other construction projects.

“The nearshoring wave and government investment in infrastructure significantly helped this sector,” said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, in a phone interview. “Construction is offsetting the weakness in manufacturing.”

Industrial production rose 3.9% from a year earlier, from 0.7% growth in April.

Weak demand for manufactured goods is due to the slowdown in the US economy, and this weakness is likely to continue in the second half of the year, he said.

Learn more about why manufacturing in Mexico will be a competitive advantage for you here.

Source: Bloomberg