MexECON Blog

January PMI Falls to 52.6

Mexico's January purchasing managers index for manufacturing (PMI) fell to a seasonally-adjusted 52.6, after revised readings of 54.1 in December and 52.0 in November.  According to the report, from Banco de México and the official statistics agency INEGI, the decline in January came in large part from the heavily weighted subindex on new orders.  That subindex fell to 54.3, after readings of 55.8 in December and 54.0 in November.  The subindex on production fell to 56.3, after readings of 57.2 and 53.2 in the previous two months.  The subindex on inventories slipped to 49.8, after 16 straight months above 50.  In contrast, the subindex on employment rose to 52.3, and the subindex on supplier deliveries edged up to 47.7.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  The report for January therefore suggests that Mexico's manufacturing sector is still growing, as it has been for the last 29 months, and that its growth is broad based.  Early in the current recovery, Mexican manufacturing growth mostly reflected a recovery in exports, as U.S. firms rebuilt inventories.  Exports are still growing, but the pace has slowed, and U.S. demand now seems to come largely from modestly increasing consumption and investment.  Fortunately, Mexico's own domestic demand is now in a strong upswing, providing new stimulus for the country's factories.  As long as the European debt crisis does not get dramatically worse and Asian economic growth does not slow too much, Mexico's manufacturing sector is likely to keep growing well in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1201

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