MexECON Blog

January PMI Rises to 53.6

In a report late last week, Mexico's January purchasing managers index (PMI) for the manufacturing sector rose to a seasonally-adjusted 53.6.  That marked the highest reading for the index since August 2006.  In addition, the PMIs for each of the previous three months were revised upward, with the reading for December being revised substantially higher to 53.1.  According to the report, from Banco de México and the official statistics agency INEGI, the heavily-weighted index on new orders rose to 53.7 in January, while the subindex on manufacturing employment rose to 52.5 and the subindex on supplier deliveries rose to 50.4.  The subindexes on production and inventories both fell modestly, though they remained above 50.0.

Comment:  Like most such indexes, Mexico's manufacturing PMI is designed so that readings over 50 point to expanding activity.  The extraordinarily high level of the January index and the fact that the PMI has improved for four straight months are consistent with other recent data releases that suggest the Mexican economic recovery is starting to fire on all cylinders.  Export growth had been the main driver at the beginning of the rebound, but domestic consumption and investment are now starting to rise as well.  At some point, demand will likely moderate, and challenges such as the strengthening peso will start to drag on growth.  In addition, Mexico still has to deal with the fact that its long-term growth rates have been unimpressive.  Nevertheless, the current economic rebound is quite robust and points to a substantial near-term improvement in conditions south of the border.

Patrick Fearon, CFA
Vice President, Fund Management

                                            Mexico's Manufacturing PMI
                                    Seasonally Adjusted, >50 = Expansion
                                      Source:  INEGI and Banco de México
PMI 1101

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