MexECON Blog

November PMI Rises to 52.3

Mexico's November purchasing managers index (PMI) for manufacturing rose to a seasonally-adjusted 52.3, after upwardly revised readings of 51.5 in October and 51.4 in September.  The index is now at its highest level since June, though it is still some distance from its cycle high of 53.4 in April.  According to the report, from Banco de México and the national statistics agency INEGI, the heavily weighted subindexes on new orders and production both rose for a second straight time in November, reaching multi-month highs.  The subindexes on employment and supplier deliveries posted slight declines.  The subindex on inventories was unchanged.

Comment:  The PMI is designed so that readings over 50 indicate expanding activity, so today's report suggests the Mexican factory sector is growing at a good pace.  In fact, the sector appears to be accelerating again, after a substantial slowdown during the summer.  The Mexican economy clearly has some momentum in it.  Nevertheless, the economy is likely to slow to a more sustainable pace in the coming months.  One reason is that U.S. demand is likely to slow, as inventory rebuilding falls back, the effect of fiscal stimulus starts to wane, and consumers continue to husband their resources and pay down debt.  In addition, the strong peso is likely to be a headwind for Mexican exports.  Mexico's economy is still likely to grow well in the near term, but the pace of growth is expected to become more moderate.

Patrick Fearon, CFA
Vice President, Fund Management

                                         Mexico's Manufacturing PMI
                                Seasonally Adjusted, >50.0 = Expansion
                                   Source:  INEGI and Banco de México
PMI 1011

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