MexECON Blog

August PMI Falls to 52.3

Mexico's August purchasing managers index (PMI) for manufacturing fell to 52.3, retreating from a revised 54.6 in July and reaching its lowest level since last October.  The index's decline in August was its sharpest since January 2009, in the midst of the global financial crisis.  According to the report, from Banco de México and the national statistics agency INEGI, the drop in August stemmed mostly from big declines in the heavily-weighted subindexes on new orders and production.  The subindex on new orders fell to 54.9, versus 56.9 in July.  The subindex on production dropped to 53.2, versus 59.2 in July.  The subindex on manufacturing employment fell only modestly to 50.3, while the subindex on supplier deliveries rose to 50.3 and the subindex on inventories rose to 53.9.

Comment:  The PMI is designed so that readings over 50 point to expanding activity, so the report for August suggests Mexico's manufacturing sector is still growing broadly.  The index had surged to a seven-year high in July, in spite of weaker economic activity abroad, so some pullback in August should not have been a surprise.  Moreover, Mexico's PMI performed far better in August than the indexes in most other key countries, the majority of which were released yesterday.  In the United States, for example, the PMI fell to 50.6 in August, and in the Eurozone, the PMI dropped to 49.0.  South Korea's PMI fell to 49.7.  Nevertheless, in spite of Mexico's relative out-performance last month, great caution is in order.  The global economic recovery has slowed to a crawl, raising the risk of renewed recession and highlighting politicians' apparent inability to effectively deal with their economic challenges.  Global confidence could well continue to weaken, foreign demand could fall further, and Mexican exports and industrial activity could well 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 1108

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