Mexico: Mexico's manufacturing sector keeps solid rhythm in March and positive news come from U.S.
April 1, 2016
Survey-based data showed that Mexico’s manufacturing sector got off to a positive start in Q1 2016. The seasonally-adjusted manufacturing indicator elaborated by the Mexican Institute of Finance Executive’s (IMEF) remained virtually unchanged in March, inching down from 51.8 in February to 51.6. March’s result was also on par with the 51.5 the markets had expected and continued to suggest that business activity in the sector is on expansion mode since the indicator remains above the 50-threshold that expansion from contraction.
Looking at the details in March, manufacturing production continued to rise and reached the highest level in nine months. Moreover, employment levels and supplier deliveries rose to a four-month high and three-month high, respectively. Due to higher demand, inventories decreased to a low last seen 11 months ago. That said, new orders continued to slow, reaching a four-month low in March.
Another gauge that measures performance in Mexico’s manufacturing sector also remained broadly stable in March, compared to February. The Markit Manufacturing Purchasing Managers’ Index (PMI) inched up from 53.1 in February to 53.2 in March, which marked a 10-month high. According to Markit, March’s reading continued to show expansion in the manufacturing sector and the mild improvement over the previous month resulted from faster production rates and higher growth in both new business and staffing. Markit also reported that the current weakness in the Mexican peso has supported higher export sales, but continued to push up input prices.
Positive news also came in from Mexico’s northern neighbor. According to the manufacturing index elaborated by the Institute of Supply Management (ISM), business activity in the U.S. manufacturing sector improved notably in March: the indicator jumped from 49.5 in February to 51.8 in March. The index rose in March for third consecutive month and recovered the ground lost since December, when the indicator fell to the lowest level in six and half years. Also, March’s result signaled the first outright expansion in the manufacturing sector since August 2015 as the indicator jumped above the 50-threshold that distinguishes between expansion and contraction in the sector.
Author: Ricardo Aceves, Senior Economist