WRAPUP 1-Mexico factory output rises, but rates seen on hold

* Feb IP rises 0.59 pct month/month, up 4.4 pct year/year

* Construction output, gross fixed investment fall

* Uneven growth seen keeping central bank on hold
(Wraps together government data, auto output, adds comment)

MEXICO CITY, April 12 (BestGrowthStock) – Mexican factory output
rose in February and auto production surged in March, data
showed on Monday, even as weak investment trends made it clear
the economy is struggling to recover from a deep recession.

Industrial production (MXIP=ECI: ) rose 0.59 percent in
February compared to January while auto production jumped 85.1
percent in March compared to the same month a year ago, the
national statistics agency said.

Automobiles and auto parts account for about a fifth of
Mexico’s exports of manufactured goods. Exports have been
driving the local economic recovery since last year after a
collapse in U.S. consumer demand dragged Mexico into its worst
recession since the 1930s.

Offsetting signs of growth, industrial production data
showed that construction output slumped while a separate report
showed a drop in investment on heavy equipment.

Analysts said the reports underscored that the rebound in
domestic demand is lagging the recovery of the export-oriented
manufacturing sector.

“We expect industrial activity to continue to firm on the
back of growing external demand,” Alberto Ramos, senior
economist at Goldman Sachs, wrote in a report to clients.

“However, the construction sector should continue to be a
drag on industrial activity, like other non-industrial
non-tradable sectors of the economy whose performance has been
notoriously sluggish as consumer confidence still remains quite
depressed,” Ramos added.

CENTRAL BANK ON HOLD

The rebound in Mexico’s manufacturing sector is expected to
support overall growth of around 4 percent this year after the
country’s economy shed 6.5 percent in 2009.

Analysts said the mixed data picture fed expectations that
the central bank will keep interest rates on hold to support
growth despite a recent rise in inflation, mostly due to new
taxes and fuel price hikes.

“The economy is still operating at slack capacity, so
production is not yet adding to inflationary pressures,” said
Victor Ceja, an analyst at brokerage Valmex in Mexico City.

Mexican central bank policymakers are unlikely to raise
interest rates while mid-term inflation expectations remain
“well behaved,” the bank’s chief Agustin Carstens said in a
newspaper interview. For details, see [ID:nN12111509]

Monday’s industrial production data showed February output
(MXIPY=ECI: ) rose 4.4 percent, compared to the same month in
2009. Construction output fell 4.7 percent, year-on-year,
according to the national statistics agency.

A separate report from the agency showed gross fixed
investment (MXGFI=ECI: ) fell by a worse-than-expected 4.8
percent in January compared with the year-ago period.

The investment reading is a measure of spending on
machinery, equipment and new construction.

In another report, the Mexican Automotive Industry
Association, or AMIA, said vehicle exports soared 60.7 percent
in March. [ID:nN12194705]

WRAPUP 1-Mexico factory output rises, but rates seen on hold