MexECON Blog

June PMI Rises to 53.3

Mexico's June purchasing managers index (PMI) for manufacturing rose to a seasonally-adjusted 53.3, while the reading for May was revised upward to 52.8 and the reading for April was revised upward to 53.4.  According to the report, from Banco de México and the national statistics agency INEGI, the rise in June reflected a rebound in the heavily-weighted subindexes on new orders and production.  The subindex on new orders rose to 55.6 from 54.2 in May, and the subindex on production rose to 54.6 from 53.7.  Just as notable, the subindex on inventories rose for a third straight month to 53.4, its highest level since January 2004.  In contrast, the subindexes on employment and supplier deliveries fell modestly.

Comment:  The PMI is designed so that readings over 50 point to expanding activity, so today's report suggests Mexico's factory sector is continuing to grow broadly.  More important, the rebound in June, like the rebound in some other counties' indexes, suggests some of the recent slowdown in manufacturing could have come from one-off factors such as this spring's massive earthquake in Japan.  Still, there is reason for caution.  The world economic recovery has hit a potentially long-lasting soft spot, so demand for Mexican exports could remain muted, and that would have a significant negative impact on the country's manufacturing sector.  Mexican manufacturing still looks set to grow in the coming months and quarters, but the growth rate could be slow, and a pullback cannot be ruled out.

Patrick Fearon, CFA
Vice President, Fund Management

                                                Mexico's Manufacturing PMI
                                        Seasonally Adjusted, >50 = Expansion
                                          Source:  Banco de México and INEGI
PMI 1106

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