MexECON Blog

February PMI Falls to 51.3

Mexico's February purchasing managers index for manufacturing (PMI) fell to a seasonally-adjusted 51.3, down from revised readings of 52.4 in January and 53.8 in December.  The index is now at its lowest level since September 2010.  According to the report, from Banco de México and the official statistics agency INEGI, the decline in February reflected decreases in three of the five subindexes.  The heavily-weighted subindex on new orders fell to 52.8, bringing it to its weakest reading in 17 months.  The subindex on production fell to 54.5, its lowest level since October, while the subindex on employment edged down to a five-month low of 50.8.  In contrast, the subindex on supplier deliveries rose to 50.0, reaching that milestone for the first time since late summer, and the subindex on inventories rose to 51.0.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  The report for February therefore suggests Mexico's manufacturing sector is still growing, though less broadly than it has been for the last couple of years.  That is consistent with the U.S. PMI, which fell to a three-month low of 52.4 in February.  Economic activity in the United States and Mexico has clearly reaccelerated after a pause in the midst of European debt worries late last summer and fall, and the outlook is now brighter than it was just a few months ago.  However, there is some question whether the reacceleration can continue with relatively weak income growth on both sides of the border.  Mexico's manufacturing sector is still likely to continue growing in the near term, but the pace of growth could be somewhat limited.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1202

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