(Recasts with details on construction, factory output)
MEXICO CITY, Oct 10 (Reuters) - Mexican industrial production rose in July at its fastest pace in four months as a recovery in construction gained more ground, but factory output slipped in Latin America's No. 2 economy
Industrial activity rose 0.4 percent in August compared with July, the national statistics agency said on Friday, above expectations of 0.2 percent in a Reuters poll and a downwardly revised 0.2 percent expansion in July.
The economy is seen growing around 2.5 percent in 2014 after a slump in U.S. growth early this year hit demand for Mexican exports while new taxes weighed on domestic demand. Second-quarter growth was just above expectations.
Factory output, a component of industrial output, fell 0.3 percent in August, slipping after posting solid growth in July. Mexico sends nearly 80 percent of its exports, which are mostly factory goods, to the United States.
The component measuring construction, which contracted sharply last year, rose 1.2 percent, pointing to a stronger domestic economy. Construction of buildings picked up, but the measure of new roads and bridges fell despite higher infrastructure spending reported by the government.
Utilities output rose 1 percent compared to the prior month, while mining grew 0.3 percent, bouncing back after two straight months of decline amid a slump in oil production.
Industrial output rose 1.4 percent in August from a year earlier, compared with expectations for a 2.1 percent increase and July's downwardly revised 2 percent annual growth rate. (Reporting by Michael O'Boyle Editing by W Simonn)