Economics: Gross fixed capital formation in August posts a contraction due to a significant weakening in construction
The Inegi published figures for gross fixed capital formation as of August, which showed an annual -0.9% contraction. This was the first decline since February 2021 and is attributable to a -6.0% contraction in construction investment, while the machinery and equipment component increased 5.0%.
The drop in construction investment represents a considerable contrast to the average 11% growth in the first half of this year and of 21% in 2023. During the month, public construction continued its decline similar to the previous four months, but in addition, private construction experienced its first contraction (annual -5.1%) and private investment in machinery and equipment other than transportation equipment has also decreased. This reflects the environment of uncertainty generated by what in August was perceived as posing a very high risk, but which is now a reality. These risk factors include the Judicial Reform, which will have a negative impact on the rule of law, and Donald Trump's victory, which implies the possible imposition of trade sanctions and a more complicated renegotiation of the USMCA for 2026. This issue of the Economic Outlook analyzes the recent evolution of gross fixed capital formation, business confidence, as well as the medium-term outlook.
In the week's indicators, annual inflation in October rose again, to 4.76%, compared to 4.58% a month earlier. This is above the 2023 inflation rate (4.66%). Private consumption grew an annual seasonally adjusted 2.8% in August, which represents a downtrend with respect to the January-August 2024 average (3.6%).
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