MexECON Blog

July PMI Rises to 54.8

In a report yesterday, Mexico's July purchasing managers index (PMI) for manufacturing rose to a seasonally-adjusted 54.8, its highest level in seven years.  In addition, the June reading was revised upward to 53.7, and the May reading was revised upward to 53.1.  According to the report, from Banco de México and the national statistics agency INEGI, the rise in July came primarily from a jump in the subindex on production.  That subindex rose to 59.3 from 55.3 in June.  In addition, the subindex on new orders rose to 57.5 from 56.1 in June.  The subindex on manufacturing employment rose slightly, while the subindexes on supplier deliveries and inventories fell modestly.

Comment:  The PMI is designed so that readings over 50 point to expanding activity, so the report for July suggests Mexico's manufacturing sector is not only growing broadly, but is accelerating.  That is especially impressive given that PMI readings for July were weaker for several key countries around the world.  Nevertheless, some caution is in order.  Some of the rise in Mexican production could reflect the auto sector recovering from the supply shortages caused by this spring's earthquake in Japan.  The much weaker performance of the subindexes on employment, deliveries, and inventories also shows not everything is improving in the factory sector.  Most important, the global economic rebound is showing signs that it may have progressed just about as far as possible.  With no new impetus on the horizon, global economic growth could well continue to slow, and a new global recession could be in the cards.  If that were to happen, Mexican manufacturing would likely stagnate or fall in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

                                               Mexico's Manufacturing PMI
                                       Seasonally Adjusted, >50 = Expansion
                                         Source:  Banco de México and INEGI
PMI 1107

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