* Mexican industrial output 0.9 percent vs poll 0.22 percent
* Reverses August drop that was biggest in three years
* No implication for interest rates seen
By Alexandra Alper and Krista Hughes
MEXICO CITY, Nov 12 Mexico's industrial output
rose more than expected in September, as factories in Latin
America's No. 2 economy gained steam in line with their U.S.
Growth in industrial production picked up to a
seasonally adjusted 0.9 percent from a 0.8 percent contraction
in August, which was the biggest fall in three years, according
to revised numbers released by the National Statistics Agency on
September's month-over-month number also beat expectations
for a 0.22 percent expansion expected in a Reuters poll of
analysts and was driven by a 1.6 percent rise in manufacturing.
The mining sector notched a fall of 1.55 percent.
But output compared with that of September 2011
rose a lukewarm 2.4 percent, the slowest growth since April
2011. It came in below the 2.95 percent increase expected in the
poll and the downwardly revised 3.4 percent expansion in August.
"Industry is probably growing, although at a slightly weak
pace," said David Rees, an emerging markets economist at Capital
Economics in London, who cautioned against reading too much doom
and gloom into the annual figure.
"Even though it has slowed to about 2.5 percent, that is
still pretty good compared to most other countries," Rees said.
"We would expect Mexican industry to keep doing quite well but
not so outstandingly."
The month-to-month expansion was in line with a pickup in
the United States, where manufacturing activity rose in
September for the first time since May.
U.S. factory activity rose further in October as new orders
improved. Economists said increases in Mexican auto production
and exports last month should also buoy activity south of the
Mexico sends nearly 80 percent of its exports to the United
States, and its factories operate nearly in lock step with their
counterparts north of the border.ž
NO RATE IMPLICATIONS
The figures are unlikely to change the central bank's view
of slowing domestic growth coupled with a worrying rise in
inflation, which has overshot the central bank's 4 percent
ceiling for the last five months.
Interest rates have been held at 4.5 percent since mid-2009
and although policymakers have said they may increase soon if
inflation does not show a sustained downward trend, markets are
not pricing in a hike until mid-2014.
In a presentation to an investors' forum, Banco de Mexico
board member Manuel Sanchez said sustained high inflation could
lead to a rise in inflation expectations and the erosion of the
central bank's credibility in controlling inflation at around 3
percent, its long-term target.
"A diversion in inflation from the (3 percent) objective for
a prolonged period could generate pernicious effects," Sanchez
said, according to a copy of the presentation published on the
central bank's website. "For those reasons, monetary policy must
act in a timely way."
Sanchez also said an inflow of foreign investment had not
lead to a sustained rise in the peso which could have slowed
exports, a key driver of growth.