Mexico: Manufacturing activity remains weak in September
October 1, 2015
Recent data suggest that activity in the manufacturing sector was on the weak side in the third quarter. The seasonally-adjusted manufacturing indicator elaborated by the Mexican Institute of Finance Executive’s (IMEF) fell from 51.7 in August to 50.2 in September, marking a third consecutive drop and a nine-month low. That said, the drop was widely seen as the markets had expected the indicator to drop to 50.1. Signs of deceleration in the manufacturing sector drove the indicator to rest dangerously close the 50-threshold that separates expansion from contraction in activity in the sector.
The survey details showed that production levels fell to the lowest in nine months. Meanwhile, employment and inventories dropped mildly over the previous month. Conversely, new orders remained virtually unchanged from last month’s level, while supply deliveries rose to a four-month high.
In the United States, where the Mexican manufacturing sector is strongly linked to its manufacturing industry, the ISM manufacturing slipped from 51.1 in August to 50.2 in September, which marked the lowest reading in over two years. September’s result puts the index just above to the 50.0-threshold that distinguishes between expansion and contraction.
More signs that the Mexican manufacturing sector is slowing were recorded in another gauge that measures performance in the sector. The Markit Manufacturing Purchasing Managers’ Index (PMI) edged down from 52.4 in August to 52.1 in September, which represented a three-month low. According to Markit, “Mexico’s manufacturing sector struggled to recover from the loss of momentum experienced in August.” The details of the survey also showed that manufacturing output fell in September and new business and employment levels continued to increase, although at a slower rate than in the previous month. Markit also explained that Mexican manufacturers were cautious to hire new staff or increase their stock levels, which stemmed from rising economic uncertainty and a fall in growth in new orders.
Author: Ricardo Aceves, Senior Economist