Mexico construction industry deflates in 2013

Source: Camara Mexicana de la Industria de la Construcción
Source: Camara Mexicana de la Industria de la Construcción

At the outset of 2013, the Mexican construction industry was coming off a disappointing 4Q12 and working on psyching itself up for improved results in 2013.  As we noted in a post this past Feburary, the Mexican Construction Industry Chamber (CMIC) was projecting sector growth of up to 5.7% for this year, based on optimistic projections of public works spending under new President Enrique Peña Nieto.

Now, with the benefit of hindsight, we can see that those hopes were dashed and in reality the industry absolutely tanked this year.  As the  graphic demonstrates, construction industry performance was appalling through the first three quarters even compared to the very disappointing national GDP growth.  Quarterly construction growth through September has been deep into negative numbers topped off with a hair-raising -6.9% in 3Q13.  As of October, the CMIC was projecting final sector growth for the year at -2.0%.

Decreased activity and investment in the industry this year has negatively impacted related economic activities such as materials supply, employment and overall industrial output.  Sluggish construction activity has even been blamed for a 10.4% dropoff in truck sales through October.  Industry leaders are ready to write off 2013 as a dud, but once again they are looking to the coming year to bring the sector back to health.  In addition to anticipated rebounds in both U.S. and mexican GDP in 2014, The CMIC is looking to major upcoming infrastructure projects such as Monterrey metro expansion and the trans-peninsular Yucatan passenger rail line to help drive a turnaround next year.  On an even larger scale, the industry is hoping for an investment boom if a proposed energy industry reform is passed.  The reform, currently under deliberation in the Mexican Congress, seeks to clear the way for greater private sector participation in oil and gas exploration and extraction.  Based on these factors, the CMIC is currently ballparking projected 2014 growth for the industry at 3.5%.

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