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Markets: Mexico beats US and Canada by a mile 30 Mar 2017 Region: Global, Topic: Prices, Market & Product: End Use (Cable Materials supply, Construction, Oil/Petchems/Gas, Power Utilities, Renewables, Transportation), Energy (Harnesses and Assemblies, HV Power Cable, LV Power Cable, MV Power Cable, Overhead Conductors, Submarine Power Cable, Winding Wire) North America saw a 1.3% increase in copper wirerod used in wire and cable production for 2016 to 1.46 million tonnes for 2016. This was mainly driven by Mexico, which showed a 9.2% increase in copper wirerod used in wire and cable production, reaching 423,000 tonnes. This compares to a contraction of 1.9% in copper wirerod used in wire and cable production in the US, the largest market in our North America region, to 960,000 tonnes. The primary reason for this is that a lot of the cable used in the US is imported, with a lot of this coming from Mexico. Canada did not fare too badly, considering the challenges that 2016 presented, with a 1.8% increase to 79,000 tonnes. Most of the growth came from energy cables, with North America seeing a 2% y/y rise in copper wire and cable consumption to 1.28 million tonnes and a 2.9% y/y increase in copper write and cable production to 976,000 tonnes for 2016. The key drivers for energy cables in North America were the automotive industry in Mexico and the US, as well as construction in the US and Canada, plus satisfactory spending in utilities infrastructure spending, particularly in the US. In the US, consumer spending was the only consistent driver of growth in 2016. Employment increases were smaller but still steady and incomes rose. Both of these factors should support growth in the housing and vehicle markets in 2017 as well. In the US, single family dwelling start-ups were up in 2016, but multi family dwelling units were down. In Mexico, while the economy took a hit from lower oil and gas production and prices, car manufacturing has provided most of the growth in 2016, as did exports of wire harnesses, winding wire and LV cable to the US for use in the automotive and appliances industries. However, cables into the oil and gas industries in all three North American countries continued to suffer. United States We are now more optimistic regarding the US economy for two main reasons. First, business confidence is on the rise and, historically, within two to three quarters of a shift in sentiment, investment spending by companies has increased. Since the shift occurred after the election, a higher contribution to GDP growth from investment could emerge as early as Q3 2017. Second, the Trump administration's rhetoric on trade has lessened so the negative effects from higher tariffs on China and Mexico, in particular, present much less risk to the outlook in 2017. We now expect GDP growth of 2.3% this year, rising to 2.5% in 2018. The residential construction sector continues to expand, with the single-family sector driving growth, as expected, supported by a robust job market. Along with better than expected spending on non-residential structures, we project US construction output to grow by 4.5% this year. We continue to expect total vehicle output to decline by 2.5%, given model platform plans already in place and the excess inventory of cars which will dampen sales. Now that the energy sector is on the mend and manufacturing has picked up, total IP is forecast to rise by 1.8% this year and 2% in 2018. The key risk to our IP and GDP forecasts in 2017, both upside and downside, is the level of investment spending achieved by US companies. Mexico President Trump's stated policies to renegotiate NAFTA, restrict immigration and "Buy American" caused a massive drop in the peso and prompted at least one US automaker to terminate a capacity investment. A protectionist America has negative consequences for Mexico's future growth potential. However, the risk of the dissolution of NAFTA appears to have decreased. As a result, North American supply chains are less likely to experience disruption this year which should allow GDP to expand by 1.9%. Although the weaker peso is positive for exports and remittance income from the US, interest rates have increased in order to combat higher inflation and will potentially constrain investment spending. Oil prices have risen, but not by enough to significantly boost government spending. As a result, we project growth in construction output of just 1.5% this year. In December 2016, Mexico auctioned eight deepwater oil & gas blocs and agreed a joint venture for a promising new field. This is a positive development for the country's energy sector and will be a source of stronger growth potential in the medium term. Contributor: Natalie Noor- Drugan, Publisher & Editor in Chief, Wire & Cable News