Mexican Industrial Production (Sep MM) -1.4% vs. Exp. -0.2% (Prev. 0.6%)

Mexican Industrial Production (Sep MM) -1.4% vs. Exp. -0.2% (Prev. 0.6%)

A miss of this size on Mexican industrial output extends the weakness that has characterised the sector through repeated soft patches, in which construction and manufacturing have tended to lead the swings while mining and utilities move less. Mexican monthly IP prints historically matter more for the domestic rates debate than for MXN directly: the peso has typically been traded more off carry, the Banxico-Fed differential and US activity spillovers than off single domestic releases, so sustained currency reaction to data of this kind has been the exception rather than the rule. The distinction worth drawing is whether the contraction is broad-based across components or concentrated in construction, which has been the volatile swing factor in past episodes of this kind. A run of weak activity prints has, in prior cycles, hardened the case of the easing-leaning members of the Banxico board, making the composition of the vote and the tone of the minutes more informative follow-ons than the print itself. Worth watching are the bi-weekly inflation releases that bookend the next policy meeting, since activity weakness only shifts the rate path where it is not offset by sticky services prices. As a single monthly print, the signal is directional rather than decisive.