MexECON Blog

April PMI Rises to 53.7

Mexico's April purchasing managers index (PMI) for the manufacturing sector rose to a seasonally-adjusted 53.7, up from a revised 53.1 in March and matching the strongest readings in the current economic recovery to date.  According to the report, from Banco de Mexico and the national statistics agency INEGI, the rise in April primarily reflected a jump in the heavily-weighted subindexes on new orders and production.  Both those subindexes came in at 56.3.  The subindexes on employment and inventories fell slightly, to 52.1 and 51.2, respectively.  The subindex on supplier deliveries was stagnant at 48.1.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  Therefore, today's report suggests Mexico's factory sector continues to grow quite broadly.  It is especially impressive that the PMI keeps revisiting its cycle high more than a year after the economic rebound took hold.  The factory sector is benefiting mightily from Mexico's booming exports, but it is also getting a boost from the country's improving domestic demand.  Those trends show every sign of continuing in the near term.  The main risk is probably that the peso could appreciate even further and price Mexican goods out of international markets.  In addition, an unforeseen crisis such as the recent Japanese earthquake or political unrest in the Arab world could undermine confidence and weigh on foreign demand.  Finally, the impending end of monetary loosening by the U.S. Federal Reserve has the potential to slow U.S. demand for Mexican goods.  Nevertheless, the manufacturing sector in Mexico remains in a virtual renaissance for the time being.

Patrick Fearon, CFA
Vice President, Fund Management

                                          Mexico's Manufacturing PMI
                                Seasonally Adjusted, >50 = Expansion
                                   Source:  INEGI and Banco de México
PMI 1104

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