(MENAFN- The Rio Times) Mexico's industrial engine lost more momentum in August, underscoring how a global goods slowdown is seeping into one of Latin America's most trade-exposed economies.

Industrial production fell 0.3% from July-confounding forecasts for a rebound-and dropped 3.6% from a year earlier.

That follows a steeper monthly decline in July (-1.2%) and a 2.7% annual fall, marking two straight months of contraction and a sharper year-on-year slide.

The story is straightforward: the expected bounce never came. The story behind it is a tougher mix of soft external demand and cautious domestic investment. Europe's latest readings point to weaker manufacturing and trade, a headwind for Mexico 's export-heavy value chains.

At home, firms have been selective with capital spending-enough to keep operations running, not enough to power a broad-based upturn.



The much-touted“nearshoring” pipeline is real but uneven in timing; it hasn't yet offset the cyclical drag from slower global orders. For policymakers, the print complicates an already delicate balance.
Mexico Slowdown Keeps Rate Cuts Cautious
Inflation has eased at the headline but underlying pressures remain sticky, leaving the central bank inclined to cut rates only gradually. Today's softer output argues for support, but not at the expense of price credibility.

The likely path is a cautious, data-dependent easing cycle rather than aggressive moves. Markets will read this in three ways. In rates, hopes for faster, front-loaded cuts should fade, even as weaker activity lends some support to the belly of the curve.

For the peso , softer growth is a mild headwind, tempered by still-positive real yields-range-bound trading remains the base case.

In equities, domestically sensitive cyclicals and industrials face the clearest pressure, while defensives and exporters tied to healthier end-markets should prove more resilient.

Bottom line: Mexico's factories are still losing altitude. Until orders and investment re-accelerate, policy will stay patient-and assets will trade the range rather than chase a trend.

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