Mexico's economy continues its recovery after two years of below-potential growth and it is on its way to growth 2.5% in 2015. But risks are to the downside, as growth decelerated unexpectedly in May driven by a contraction in industrial production. The weakness in industrial production was broad-based, with contractions in manufacturing and construction and only a slight increase in mining, as oil production finally stop falling. The bright spot in manufacturing since 2010 has been auto and auto-related production.



However, manufacturing excluding autos has been weak. And at the margin, production of autos and of manufacturing products ex-autos has moderated. In both cases the deceleration seems to be in line with developments in the US.



"We believe the story is cyclical and expect manufacturing to gain strength with the US, but we are vigilant of potential structural stories that could be developing and that are difficult to identify at this point," notes BofA Merrill Lynch.