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 Business News | April 2006 
Output Up by more than 5 Percent
 Wire services/El Universal
| | Surging industrial production in the first two months of the year may push Mexico´s first-quarter economic growth as high as 5 percent. |
Industrial production rose more than 5 percent for a second month in February as declining interest rates spurred homebuilding and quickening U.S. economic growth fueled demand for Mexican-made cars.
Industrial output rose 5.4 percent from a year earlier after increasing 6 percent in January, a government report showed. Industrial production expanded 1.6 percent in 2005.
Surging industrial production in the first two months of the year may push Mexico´s first-quarter economic growth as high as 5 percent, said Salvador Moreno, chief economist at ING Groep NV´s Mexican unit. That would be the fastest growth since President Vicente Fox took office in 2000 and would benefit his party´s candidate in the July 2006 presidential race, former Energy Secretary Felipe Calderón.
"When you have an economy that´s picking up speed it certainly will have an effect on the election and benefit the candidate from the president´s party," said George Grayson, a professor of government at the college of William & Mary in Williamsburg, Virginia.
Calderón, the National Action Party´s candidate, has lagged behind former Mexico City Mayor Andrés Manuel López Obrador in opinion polls.
A recovery in Mexican automobile production led the two-month surge in Mexico´s output. The number of vehicles produced in February rose 32 percent from a year earlier to 166,830 units, according to Mexico´s Automobile Association.
Auto production, which accounts for about 10 percent of total industrial production according to the Finance Secretariat, rose to a record 193,587 units in March, indicating that industrial output remained strong through the first quarter, Moreno said.
Automakers such as Volkswagen AG, Europe´s largest carmaker, have ramped up production this year as they introduce new models for export.
Volkswagen said in a filing to the Mexican stock exchange April 6 that it manufactured 99,965 cars at its Puebla plant in the first three months of the year, the highest quarterly production in 5 years. Volkswagen exported 83 percent of the vehicles.
Vehicle production is expected to grow 12 percent in 2006, helping spur economic growth, the president of Mexico´s Automobile Association, Cesar Flores, has said.
Economic growth in the United States, which buys about 85 percent of the nation´s exports, has helped spur demand for new models.
U.S. EMPLOYMENT
U.S. employers added 211,000 workers in March and the unemployment rate matched a four-year low, capping the best first quarter for hiring of any year since 2000, the U.S. government said April 7.
U.S. industrial production rebounded in February, rising 0.7 percent from the previous month after a 0.3 percent decrease in January, the government said.
"We are seeing the strongest Mexican industrial expansion in almost six years," said David Franco, an economist who covers Mexico for JPMorgan Chase & Co. in Mexico City, said in a telephone interview.
HOUSING
Adding to the surge in Mexican output is record spending on infrastructure and housing, fueled by record low interest rates. Gerardo de Nicolas, chief executive officer of Desarrolladora Homex SA, the nation´s largest home builder, said Feb. 10 that increased mortgage lending from the government and private banks will boost Mexican homebuilding in 2006 to a record 750,000 homes.
De Nicolas made the remarks in an interview with Bloomberg News in New York.
The central bank reduced the benchmark lending rate to the lowest in 18 months March 24. Banco de Mexico reduced the overnight rate a quarter percentage point to 7.25 percent from 7.50 percent, the eighth cut in as many months.
Government spending on infrastructure projects such as highways has also begun to boost Mexico´s economy as the elections approach, Moreno said.
In September Carlos Slim, the nation´s richest person, formed Impulsora del Desarrollo y el Empleo en America Latina SA, an infrastructure and development company, to take advantage of the boom. The company quickly won bids including a US$259 million contract to build a highway north of Mexico City.
"In general construction has become a very important component of economic growth," said Frank Aguado, a director at Slim´s bank, Grupo Financiero Inbursa SA in a telephone interview on Wednesday. |
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