Mexico's April purchasing managers index for manufacturing (PMI)
rose to a seasonally-adjusted 53.9, after a revised 53.0 in March
and 51.5 in February. According to the report, from Banco de
México and the official statistics agency INEGI, the rise in April
came from increases in three of the five subindexes. The
subindex on new orders rose to 56.0 in April, marking its second
straight monthly gain and bringing it to its highest level since
last July. The subindex on production rose to 55.1 from 52.5
in March, and the subindex on supplier deliveries rose to 50.4 from
49.5. In contrast, the subindex on manufacturing employment
fell slightly to 52.4, and the subindex on inventories fell
moderately to 51.1.
Comment: The PMI is designed so
that readings over 50 point to expanding activity. The report
for April therefore suggests Mexico's factory sector is once again
growing very broadly. In fact, the 53.9 reading in April was
not far below the cycle peak of 54.8 in mid-2011. The rise in
Mexico's PMI was consistent with the good increase in the U.S. PMI
released earlier this week. Because Mexico is so dependent on
exports to the United States, the apparent rebound in U.S.
manufacturing is especially positive for the country.
Moreover, other data today suggested the rise in U.S. initial
jobless claims over the last month could partly reflect
problems with the seasonal adjustment process around the Easter
holiday. In other words, the U.S. labor market may be
stronger than previously thought, and overall U.S. economic growth
may not have softened as much as it seemed this spring. That
suggests Mexican exports could continue to reaccelerate, driving
increased manufacturing activity in Mexico.
Patrick Fearon, CFA
Vice President, Fund Management