In February, gross fixed investment fell 3% compared to January, a decline that represented the largest slide in the variable since June 2021 and meant the ground it had gained during the previous December and January fell back, according to figures released by the National Institute of Geography and Statistics (Inegi).
Within the indicator, the most pronounced fall was observed in the construction category (-8.2%), with a significant drop observed in the non-residential construction category (-15 percent). This decline could not be offset by the 6.7% growth in investment in machinery and equipment, which was underpinned by investment in imported fixed capital (+12.4 percent).
“The decrease occurred in a context of structural change, as Russia’s invasion of Ukraine has increased uncertainty and exacerbated the risks facing the global economy, so we are revising downward our forecast for the change in investment in 2022 from 3.5% to 2.7%”, said Marcos Arias, analyst at Grupo Financiero Monex.
In an accumulated reading, in January and February, gross fixed investment was 11% lower than that observed during the same two-month period in 2019, with a particularly marked delay precisely in the construction sector, where the lag is 15.3 percent.
“The index remains stagnant at levels that were originally achieved in 2007, which shows the wide lag that prevails in this component of aggregate demand,” said Marcos Arias.
According to seasonally adjusted figures, fixed investment experienced its maximum level in July 2018 and from that point on it has exhibited fluctuating but systematic falls, so that the weakness of capital spending began before the outbreak of the crisis due to the Covid-19, within the framework of some decisions of the current federal government, such as the cancellation of the work of the New Mexico International Airport and the permanent suspension of electricity and oil auctions.
Last year, gross fixed investment represented 19.8 percentage points of GDP, which meant a recovery of 0.9 points compared to 2020, when it plummeted to a 24-year low as a result of the suspension of non-essential economic activities to curb the progress of Covid-19. However, gross fixed investment is far from its highest historical level in relative terms, achieved in 2016, when it reached a record of 22.8 percentage points of GDP.
Although it is not the largest component of aggregate demand as a proportion of GDP (private consumption of goods and services reached a level of 64.6% of GDP last year), fixed investment is the component that has the greatest impact on potential output, that marks the optimum long-term growth path of an economy.
Investment decreased 3% in February, the most important component to induce more growth in economic activity”, said Jonathan Heath, deputy governor of Banxico.