MexECON Blog

October PMI Flat at 51.2

Mexico's October purchasing managers index (PMI) for manufacturing came in at a seasonally-adjusted 51.2, unchanged from the revised September reading.  After reaching a cycle high of 53.4 in April, the index has now fallen or come in flat for six straight months, and it currently stands at its lowest level since October 2009.  According to today's report, issued by Banco de México and the national statistics agency INEGI, the subindexes on production, employment, and inventories all increased modestly in October.  However, the heavily-weighted subindex on new orders was unchanged, and the subindex on supplier deliveries posted a small retreat. 

Comment:  The PMI is designed so that readings over 50 point to expanding activity, so today's report suggests the Mexican factory sector is still growing, though not as fast as earlier this year.  The apparent moderation probably stems in large part from slowing U.S. demand, as inventory rebuilding north of the border falls back, U.S. fiscal stimulus starts to wane, and U.S. consumers continue to husband their resources and pay down debt.  In addition, the strengthening peso could be having a negative impact.  This blog has long argued that Mexico's current export boom and rising industrial production are too narrowly focused on increased sales of autos and auto parts to the United States, but the recent moderation in factory activity is not necessarily a sign of problems in that sector.  Nor is it necessarily a sign that the economy is about to stall or retreat.  Mexico's economic boom may simply be preparing to slow down to a more sustainable rate.

Patrick Fearon, CFA
Vice President, Fund Management

                                       Mexico's Manufacturing PMI
                             Seasonally Adjusted, >50.0 = Expansion
                                  Source:  INEGI and Banco de México
PMI 1010

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