Gross fixed investment continues to plummet in Mexico, accumulating a drop of 4.6 percent over the previous year. While the Government has already launched several economic initiatives and there may be a slight improvement towards the end of the year, the markets do not anticipate a major shift in the trend.

In September, according to the data published today by Mexico's National Institute of Statistics and Geography (INEGI), investment fell 9.1 percent over the previous year, linking six consecutive months in contraction. The hardest fall it has taken since 2009. In contrast to July, it meant a decrease of 0.7%.

INEGI highlights that the construction sector did not maintain the positive variation it present a month ago and fell 1.5 percent, while machinery and equipment had its third consecutive monthly decline with 0.7 percent. On the other hand, foreign investment grew 2.8 points, but domestic investment fell 2.4 percent.

According to Banorte analyst Alejandro Alderete, the number are the result of lower federal government spending, with capital spending during the month showing an annual decline of 6.5 percent, according to the numbers in the federal budget. This, along with an environment of uncertainty and other idiosyncratic shocks, one of the most serious ones being the suspension of all public work investment in Mexico City.

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The analyst believes that some factors can lead to a slight improvement in the sector, however, in addition to considering that there are indications that it has already reached its lowest level, he warns that strong challenges remain for the second half of the year.

An analysis by investment firm Monex agrees, explaining that during September foreign investment could benefit from the depreciation of the exchange rate, also, on the national front, the construction sector will benefit by the reactivation of public works in Mexico City, as well as the start of some big infrastructure projects in the country.

The Banorte analyst also points out that there are signs of a possible recovery in business confidence, however, he believes that the private sector, "probably will not be able to compensate for this decline, at least not in the short term".

For example, the agreement reached between private companies and Government-owned CFE regarding gas pipelines is considered favorable, in addition to the probability that this year the national infrastructure plan will finally be into place; a plan that envisions at least100 public projects.

"Despite everything, we believe that a cautious position could remain in the coming months, particularly in the private sector," says Alderete. And despite these announcements, towards the beginning of the second half of the year, the economy remains stagnant.