Mexico’s fixed capital investment grew 6% in July, the fastest pace in 2 years

In July, Mexico's fixed capital investment, which includes money spent by both private and public sectors on long-term assets like houses, factories, and machinery, surged 6% annually, marking the most significant growth in two years. The national statistics agency INEGI reported the seasonally adjusted growth rate on Monday. The increased growth was primarily driven by a 6.9% rise in public sector fixed capital investment (FCI) and a 5.9% increase in private sector FCI.

Private sector FCI growth has been climbing steadily, reaching its highest level in 30 months, a positive indicator of businesses' confidence in their long-term economic prospects. However, public sector FCI growth slowed compared to June, which saw a robust 17.3% increase. The overall FCI growth rate was slightly higher than June's 5.9% expansion.

Despite the month-over-month increase of 1.4%, Mexico's FCI remains 2.35% below its peak in July 2024. Some experts believe the FCI growth in July is a positive sign for Mexico, but they caution that it is insufficient to conclude a sustained recovery in investment flows and confidence.

Year-to-date, annual FCI growth stands at a modest 1.7%. Experts are forecasting a 2% annual growth in FCI by 2026. INEGI data reveals that investment in construction projects grew 6.9% annually in July. Residential project investments increased by 9.2% compared to the previous year, while non-residential investments, including factories and industrial parks, rose by 4%.

Machinery and equipment investment also increased by 4.9% annually. However, spending on imported machinery and equipment rose by 9.9%, while "Made in Mexico" machinery and equipment spending declined by 3.1%. Economist Eduardo Valle at Coppel sees the increase in machinery and equipment investment as a positive sign, indicating that companies are either modernizing or expanding their production capacity.

Nonetheless, the annual decrease in spending on "Made in Mexico" machinery and equipment is a cause for concern, particularly as the federal government pushes for industrial strengthening through its Plan México initiative. Spending on "Made in Mexico" machinery and equipment has declined by 8% annually from January to July, while investment in imported machinery has increased by 3.5%.