Mexico: Manufacturing indicators signal mild improvement in August
September 1, 2016
The latest round of PMIs signaled a mild improvement in Mexico’s manufacturing sector, although weakness persists. The seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Finance Executives (IMEF) edged up from a revised 49.1 in July (previously reported: 48.9) to 49.8 in August. The index overshot the 49.5 the market had expected but remained below the 50-threshold that separates expansion from contraction.
The details the IMEF indicator sent mixed signals. Encouraging signs came from new orders, which rose for the third consecutive month. Employment also increased and reached a three-month high. Goods producers’ inventories rose after falling sharply in the previous month. Meanwhile, manufacturing production fell for the third consecutive month and reached the lowest level in more than three years.
Another gauge that measures performance in Mexico’s manufacturing sector also showed a mild increase in August. The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit edged up from 50.6 in July to 50.9, remaining just above 50. According to IHS Markit, the mild improvement reflected that positive growth in both new orders and employment offset a drop in manufacturing output. More details showed that cost pressures for Mexican goods producers had intensified in August while firms reported an increase in spare capacity and a deterioration in backlogs of work.
In the United States, the Institute for Supply Management’s (ISM) manufacturing index plunged in August from 52.6 in July to 49.4 and undershot the 52.5 the markets had expected. This is the first time in six months that the U.S. manufacturing indicator has fallen below 50, indicating a contraction in the U.S. manufacturing sector.
Author: Ricardo Aceves, Senior Economist