MexECON Blog

September PMI Drops to 51.0

Today, the MexECON blog initiates coverage of Mexico's official purchasing managers index (PMI) for the manufacturing sector.  Because the PMI is released almost immediately after the close of the month, it offers a nearly real-time view of activity in the Mexican factory sector.  The index is designed so that readings over 50.0 indicate expansion.  According to the latest report, released on Friday by Banco de México and the official statistics agency INEGI, Mexico's September manufacturing PMI fell to 51.0, down from 51.6 in August and 52.0 in July.  The index has now fallen for five straight months, and it stands at its lowest level in one year.  In September, all five subindexes retreated, with the subindex on supplier deliveries falling to 48.7 and the subindex on employment falling to 47.7.

Comment:  Mexico's second-quarter economic growth was extremely strong, and data from the third quarter have been positive.  Nevertheless, the five straight declines in the PMI serve to underscore the possibility that Mexican growth could soon moderate or even stall.  As has been noted often on this blog, Mexico's current economic rebound is uncomfortably dependent on rising exports to the United States - particularly exports of trucks, autos and auto parts.  If U.S. inventory rebuilding continues to slow and U.S. corporate and consumer demand fail to accelerate soon, Mexican exports could stall before other sectors of the economy are growing fast enough to take up the slack.  Fortunately, the September PMI shows manufacturing orders are still growing, and that means the day of reckoning is not necessarily at hand right now.  Still, Mexican growth looks vulnerable to a slowdown in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

                                Mexico's Manufacturing PMI
                      Seasonally Adjusted, >50.0 = Expansion
                           Source:  INEGI and Banco de México
PMI 1009 B

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