Mexico: Operating conditions in manufacturing sector improve slightly in October
November 2, 2015
The start of the fall has not made Mexican manufacturers moody. The seasonally-adjusted manufacturing indicator elaborated by the Mexican Institute of Finance Executive’s (IMEF) rose to 51.6 in October from a revised 50.9 in September (previously reported: 50.2), and thus ended a streak of three months in decline. October’s result, which overshot the 51.2 the markets had expected, moved the indicator further above the 50-threshold that separates expansion from contraction in manufacturing activity.
However, the survey details provided a different picture of the sector. The majority of businesses showed that their production levels decelerated over the previous month and fell to the lowest level in seven months. Moreover, new orders dropped to an eight-month low and supply deliveries to a nine-month low. The only positive results shown in the October survey were the increase in employment and the building of inventories. According to IMEF, the poor performance observed in the sub-indicators of production and new orders stemmed from a deterioration in the U.S. manufacturing sector. The ISM manufacturing index slipped from 50.2 in September to 50.1 in October, resting precariously just above the 50-threshold that distinguishes expansion from contraction.
Another indicator that measures performance in the manufacturing sector also showed that conditions improved in October. The Markit Manufacturing Purchasing Managers’ Index (PMI) rose from 52.1 in September to 53.0 in October. The result marked the highest in five months and showed that businesses increased their staff and the increase was the highest in three years. According to Markit, the latest survey showed a rebound in output growth due to an acceleration in domestic demand. That said, growth in new business moderated, in part due to a slowdown in exports and less confidence among clients regarding the global economic outlook. Meanwhile, Markit added that manufacturers were more cautious in October regarding their inventories’ policies, with input buying and pre-production stocks rising more moderately in October.
Author: Ricardo Aceves, Senior Economist