Mexico: Manufacturing activity improves mildly in January
February 1, 2017
Business activity among Mexican manufacturers improved slightly in January, but indicators continue to suggest weakness in the sector. The seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Finance Executives (IMEF) inched up from a revised 48.6 in December (previously reported: 47.7) to 49.0 in January. The indicator is nonetheless still below the 50-threshold that distinguishes between contraction and expansion.
Other details also showed a mild and yet uninspiring improvement. Employment and supplier delivery were the bright spots and increased from the previous month. In turn, new orders and manufacturing production declined. In fact, new orders registered their lowest level since mid-2013. The overall picture looks grim and the low level in the indicators suggests a deceleration in economic activity at the outset of Q1 2017.
Another indicator that measures performance in Mexico’s manufacturing sector also rose in January after having fallen sharply at the end of 2016. The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit edged up from 50.2 in December to 50.8, thereby remaining just marginally above the 50-threshold.
According to IHS Markit, growth in Mexico’s manufacturing sector was sustained at a marginal pace in January due to a return to expansion in manufacturing production and new orders rose further. The mild increase in the PMI also reflected a moderate increase in employment levels, but its growth rate was weak given the ongoing geopolitical and economic uncertainty. High uncertainty regarding U.S.-Mexico relations, unfavorable exchange rate factors, and a sharp increase in fuel costs are undermining optimism among manufacturers.
Author: Ricardo Aceves, Senior Economist