Mexico: Manufacturing indicators point to improvement in May
June 3, 2016
Mexico’s manufacturing sector heads into the summer with solid momentum, following a strong start to the year. The seasonally-adjusted manufacturing indicator elaborated by the Mexican Institute of Finance Executive’s (IMEF) rose from 51.6 in April to 51.9 in May and was a tad better than the 51.8 the markets had expected. The result—a six-month high—continued to suggest that business activity in the sector is in expansion mode since the indicator remains above 50.
According to IMEF, the improvement in May reflected a substantial increase in both new orders and manufacturing output. Employment levels decreased slightly in May, while supplier delivery times improved mildly over the previous month.
Another gauge that measures performance in Mexico’s manufacturing sector showed a more pronounced increase in May. The Markit Manufacturing Purchasing Managers’ Index (PMI) rose from 52.4 in April to 53.6 in May, which was a 13-month high. According to Markit, the notable improvement in the PMI in May was the result of Mexican manufacturers increasing production due to a rise in new orders, both in the country and abroad. In addition, backlogs of work accumulated strongly, which prompted businesses to increase their workforce numbers. Regarding prices, firms reported a faster increase in input prices in May, while their output prices increased more moderately.
North of the border, an increase in the ISM manufacturing index in May was a positive surprise. The indicator rose from 50.8 in April to 51.3 in May and also came in above the 50.4 the markets had expected. The ISM indicator continued to suggest expansion in the manufacturing sector—it sits above 50—but the mild increase over the previous months suggests the sector is unlikely to speed up any time soon.
Author: Ricardo Aceves, Senior Economist