MexECON Blog

November PMI at a Record High

Mexico's November purchasing managers index (PMI) for the manufacturing sector jumped to a seasonally-adjusted 54.9, after revised readings of 53.1 in October and 54.4 in September.  The reading for November was the highest ever recorded in the 18-year history of the index.  According to the report, all five subindexes posted improvement in November.  Most important, the heavily-weighted subindex on new orders jumped to 56.5, compared with 54.7 in the previous month.  That subindex now stands at its highest level since August 2011.  Meanwhile, the subindex on production rose to 55.7 from 54.1, and the subindex on supplier deliveries jumped to 51.4 from 49.6.  The subindex on employment rose to a record 53.8, while the subindex on inventories edged up slightly to 52.9.  The report was released today by Banco de México and the official statistics agency INEGI.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  With a reading of 54.9, the November index shows that Mexico's factory sector is now growing very broadly indeed.  Several other countries released their November PMI reports this week, but none was as impressive as Mexico's.  For example, the U.S. index unexpectedly fell to 49.5, while the Canadian index fell to 50.4.  The Euro Zone's index rose, but only to 46.2, while the U.K. index increased only to 49.1.  Among the major developing countries, China's index came in at just 50.6, and Brazil's index came in at 52.2.  Not only is Mexico far out-performing most other major manufacturing countries, but the strong reading in November points to continued declines in unemployment, stronger investment, and robust domestic demand.  Of course, there are still risks, including the European debt crisis, the potential for the U.S. economy to hit a "fiscal cliff" of sharp tax hikes and spending cuts at year's end, and the possibility that high inflation will undermine Mexican consumers' purchasing power.  Nevertheless, today's report demonstrates that Mexico's near-term outlook remains unusually good.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1211

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