Mexico: Manufacturing activity returns to expansion territory in September
October 3, 2016
The latest PMIs showed that Mexico’s manufacturing sector returned to growth in September. The seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Finance Executives (IMEF) rose from a revised 50.0 in August (previously reported: 49.8) to 51.7 in September. The result—a seven-month high—overshot the 50.1 the market had expected and remained just above the 50-threshold that separates expansion from contraction.
Encouraging signs came from new orders, output and employment, all of which registered a four-month high. Meanwhile, Mexican goods producers’ supply deliveries rose from the previous month and inventories rose after falling sharply in the previous month.
Another gauge that measures performance in Mexico’s manufacturing sector also showed a notable increase in September. The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit climbed from August’s 50.9 to 51.9, also remaining just above 50. According to IHS Markit, the data suggest a modest rebound in growth momentum in the manufacturing sector, with output, new orders and employment rising at the fastest rate in four months. Respondents to the survey reported that the cost of imported raw materials increased further in September, which is mainly the reflection of the recent weakening of the peso against the U.S. dollar.
North of the border, in the U.S., the Institute for Supply Management’s (ISM) manufacturing index bounced back from a drop in August and jumped to 51.5 in September (August: 49.4). The rebound suggests that August’s weakness was a temporary setback, which also bodes well for Mexico’s manufacturing sector.
Author: Ricardo Aceves, Senior Economist