Mining and manufacturing plummet in July and are bad for Imacec

The production industry recorded a sharp decline in July, with mining experiencing its largest drop since early 2023. According to data released by the National Institute of Statistics (INE), the Industrial Production Index (IPI) fell by 5.1% in July, marking the second deepest contraction of the year after the 7.5% decline in May. This follows a brief positive trend in June, which was the only month with growth among the last ten, and leaves the annual cumulative contraction from January to July at 3.2%. The IPI measures output in three key sectors, mining, manufacturing, and electricity, gas, and water supply, all of which contribute to the goods-producing component of the monthly economic activity index (Imacec). The latest figures suggest a poor start to the Imacec, which will be announced later this week. The decline in July interrupts a period of gradual improvement, as the IPI had risen 1.4% in June. Breaking down the components of the IPI, two of the three categories saw declines. The Mining Production Index (IPMin) dropped 7.2% over the past twelve months, contributing the most negative impact. The Manufacturing Production Index (IPMan) fell 4.9%, while the Electricity, Gas, and Water Supply Index (IPEGA) rose slightly by 0.3%. On an annual basis, the hierarchy shifts, with manufacturing being the hardest hit, declining 4.2% from January to July, followed by mining at 3.6%, and IPEGA showing a modest increase of 0.8%. Manufacturing has now experienced seven consecutive months of negative performance, continuing a downward trend that began in January. Its last positive reading was December 2025, when it grew by 0.4%. Since then, the sector has posted declines ranging from 3.7% to 4.9%, with the most severe drop occurring in July. This streak matches or exceeds the longest stretch of negative results since April 2022 through May 2023, which lasted thirteen months. The deterioration in manufacturing is widespread, with 14 of the 20 sub-sectors within the IPMan reporting declines over the past year. The most significant drop came from the production of coke and refined petroleum products, which plummeted 25.9% due to adverse weather conditions affecting gasoline and diesel production. Other notable declines include machinery and equipment manufacturing, which fell 20.0%, driven by reduced sales from government contracts. Food product manufacturing declined 2.2% as lower demand led to adjustments in production levels. Other sub-sectors saw more pronounced drops, though their weight in the overall index was smaller. Electrical equipment manufacturing fell 60.0%, metal common products decreased 20.0%, textile products dropped 19.9%, and non-metallic mineral products declined 15.2%. Among the six sub-sectors that showed growth, paper and paper product manufacturing increased 2.5%, supported by a lower base of comparison following scheduled maintenance in the same period in 2025. Growth was also observed in transportation equipment manufacturing, up 41.1%, and in repair and installation services for machinery and equipment, rising 5.3%. Mining, the most volatile component of the IPI, experienced fluctuating performance throughout the year. Output varied between small gains and steep declines, with copper extraction and processing accounting for much of the movement. Copper production fell 12.1% over the past twelve months, attributed by the INE to unfavorable weather conditions. These factors have contributed significantly to the broader decline in the mining sector.