Mexico: Manufacturing activity eases up in May
June 1, 2018
Mexico’s manufacturing sector appeared to moderate in May. On the one hand, the seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Financial Executives (IMEF) dipped to a one-year low of 51.0 from a revised 51.4 (previously reported: 51.7 points) in April. As a result, the index closed in on the 50-point threshold that separates expansion from contraction in the manufacturing sector, above which it has now been for a year. May’s more moderate expansion came on the heels of a rare contraction in new orders, which was mostly offset by stronger output. Notably, employment growth ticked up, as did delivery times and inventories—signaling that purchasing activity likely sped up.
Moreover, the manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit also showed a slower pace of expansion in manufacturing activity in May. The index ticked down from April’s 51.6 to 51.0, the lowest reading in seven months. As a result, the index landed closer to the 50-point threshold that separates expansion from contraction in the manufacturing sector. Output contracted in the month on subdued demand and growing uncertainty ahead of the upcoming 1 July general election, driving the headline reading lower. Furthermore, new order growth slowed, while higher staffing levels were reported to have alleviated backlogs somewhat. Meanwhile, the recent decline of the peso pushed input costs higher, leading to higher output prices. Buying levels fell as a result of the weaker peso, as firms postponed input purchases. By historical standards, business sentiment remained subdued in May.
Author: Christopher Thomas, Economist