Mexico: PMIs point to bleak outlook in February
March 1, 2017
The seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Financial Executives (IMEF) plunged from 48.7 in January to 46.8 in February. The indicator moved further below 50 to the lowest point since May 2009, indicating a hefty deterioration in the sector’s activity. February’s result also came in well below the 48.5 the markets had expected.
The details were equally discouraging. New orders plummeted to the lowest level in nearly eight years, while production remained stuck in the doldrums. In addition, Mexican goods producers signaled a further reduction in their payrolls, while inventories dropped to the lowest level in over a decade. The depletion of stocks reflects slower production and still solid domestic demand. Should domestic demand (or exports, in the case of foreign new orders) remain healthy, manufacturers are likely to ramp up production in the coming months. However, uncertainty and low business confidence persist.
Meanwhile, another indicator that measures performance in Mexico’s manufacturing sector also fell in February, although less sharply. The Manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit edged down from 50.8 in January to 50.6, thereby remaining marginally above the 50-threshold.
Following healthy growth in the final quarter of 2016, the overall picture looks grim and the low level in the indicators suggests a deceleration in the manufacturing sector at the outset of Q1 2017.
Author: Ricardo Aceves, Senior Economist