UPDATE 3-Mexico industry output grows at fastest pace in 9 months

Mon Aug 13, 2012 10:13pm IST

* Production rises 1.3 pct in June vs May, poll saw 1 pct

* Output up 3.7 pct vs June 2011, poll saw 3.5 pct

* Both manufacturing and construction up strongly

MEXICO CITY, Aug 13 (Reuters) - Mexican industrial output rose the most in nine months in June from May, led by manufacturing gains and underscoring solid growth that bodes for steady interest rates in the coming months.

Industrial production rose a seasonally adjusted 1.3 percent in June from May, the national statistics agency said on Monday, better than expected in a Reuters poll that saw a 1 percent rise after a dip in May, which was revised to a 0.65 percent slide.

The pace of industrial growth was the fastest since last September as the manufacturing subcomponent rose 1.6 percent in June from the previous month fueled by export orders.

Mining output, another subcomponent of the industrial sector, was flat while utilities slipped, but construction activity increased 1.49 percent, pointing to solid domestic demand.

The pace of industrial growth was the fastest since last September as manufacturing output rose 1.6 percent from the previous month fueled by export orders. Construction activity, another subcomponent of the industrial sector, increased 1.49 percent, pointing to solid domestic demand.

"Industrial production performance draws a clear picture of the current sources of the Mexican economy's growth: both external and domestic factors," Barclays analyst Marco Oviedo wrote in a note.

Latin America's No. 2 economy has been shielded from a wider global slowdown that has pushed Brazil to cut interest rates due to U.S. demand for local manufactured goods, although exports have begun to slow and U.S. manufacturing data is weakening.

"As a consequence, we expect some softening in Mexico's industrial activity in the second half (of 2012)," BNP Paribas analyst Nader Nazmi wrote in a note.

Compared with June 2011, industrial output rose 3.7 percent, above an expected 3.5 percent increase and compared to an upwardly revised 3.5 percent rate in May.

Mexican economic growth likely slowed in the second quarter to 0.8 percent from the first quarter, when it posted a 1.3 percent advance, according to a Reuters poll ahead of gross domestic product data due on Thursday.

While the economy may be easing from the unexpectedly strong Q1, the annual inflation rate rose to a more than two-year high of 4.42 percent in July, above the central bank's 4 percent limit.

But policymakers have said the spike should be temporary and investors are betting the country's benchmark interest rate will be held steady at 4.50 percent through mid-2014.

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