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Chicago Fed Midwest Manufacturing Index Down 1% in May

Brazil, Argentina Manufacturing Slows; Mexico Output Grows

Brazil and Argentina are suffering from diminishing competitiveness in the industrial sector and lower demand for exports, but Mexico is benefiting from a strong, resilient domestic consumer and robust export demand, according to the Manufacturers Alliance for Productivity and Innovation (MAPI) Latin America Manufacturing Outlook, a semiannual analysis that examines the latest trends and provides a near-term forecast for 16 major industries.

The report, authored by Fernando Sedano, Ph.D., MAPI Economic Consultant, focuses on Latin America’s three largest economies – Brazil, Argentina, and Mexico – as these countries are responsible for more than 80 percent of the manufacturing output in the region.

MAPI forecasts that overall manufacturing output in Latin America will grow 3.1 percent in 2012, lower than the 4.4 percent growth predicted in its December 2011 report. Output is anticipated to increase by 4 percent in 2013.

In developing its forecast, MAPI utilizes data from national statistical agencies, assigning weighted average annual production indexes for each industry. The weights are determined by a country’s value-added in U.S. dollar terms in each sector, using MAPI’s proprietary econometric model.

Brazil’s manufacturing activity stopped growing a year ago and has been contracting during the past six months. The ongoing manufacturing recession will be followed by a moderate recovery driven by government-induced incentives that will stimulate demand in the second half of 2012.

Mexico’s manufacturers continue growing on the heels of strong exports to the U.S. and a resilient domestic market. Growth is originating in the automotive and machinery and equipment sectors and is filtering through their supplying industries. MAPI expects that the ongoing solid performance of Mexico’s manufacturing will continue in the next few quarters, as all leading indicators are at levels associated with an expansion.

Argentina’s manufacturing is decelerating considerably, however, as protectionist measures affect supply chains and as the authorities’ interventionist stance intensifies, leading to a negative confidence shock.

“Our outlook for 2012 in this report is tempered as the result of an ongoing recession in Brazilian factories and a major slowdown in Argentina,” Sedano said. “Manufacturing activity in these two countries is suffering from inflation-adjusted exchange rate appreciations that are hurting competitiveness. On the contrary, Mexico’s manufacturers are in relatively better shape.”

The report sees growth in 15 of the 16 industries in 2012 (one, radio, television, and communication equipment, will decline by 3.8 percent) and in all 16 industries in 2013. Three industries – food and beverages, motor vehicles, and machinery and equipment – account for roughly 45 percent of the region’s manufacturing and are therefore most important to the forecast.

Food and beverages production, the largest industry in the region and one of the most stable, should grow by 4.3 percent in 2012 and by 3.5 percent in 2013. The automotive sector is forecast to improve by 2.9 percent in 2012 and accelerate to 6.4 percent in 2012. Machinery and equipment is forecast to see 8.8 percent growth in 2012 and an 8 percent advance in 2013.

© 2017 Gale Media, Inc.

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