MexECON Blog

June PMI Rises to 53.0

Mexico's June purchasing managers index (PMI) for the manufacturing sector rose to a seasonally-adjusted 53.0, after an upwardly revised 51.8 in May and a reading of 54.0 in April.  According to the report, from Banco de México and the official statistics agency INEGI, the rebound in June came from increases in four of the five subindexes.  Most important, the subindex on new orders jumped to 55.2, up from just 52.8 in May.  That marked the subindex's second-best reading in the last six months.  In addition, the subindex on production rose to 53.7 from 52.1 in the previous month.  The subindex on supplier deliveries edged up to 50.8, and the subindex on inventories rose modestly to 51.7.  Only the subindex on manufacturing employment posted a decline in June.  It fell slightly to 51.7.

Comment:  The PMI is designed so that readings over 50 point to expanding activity.  The report for June therefore suggests Mexico's factory sector continues to grow broadly.  The reacceleration in Mexican manufacturing also bucked the trend among most key developed and developing countries.  For example, the U.S. PMI fell to 49.7 in June, compared with 53.5 in May, and the Euro Zone's PMI remained mired at 45.1 for a second straight month.  Among the major emerging markets, China's official PMI edged down to 50.2 in June, compared with 50.4 in May, and Brazil's PMI dropped to 48.5 from 49.3.  Mexico's out-performance stems in large part from the country's increased export competitiveness over the last five years.  Exports are rising at a good clip, in spite of slow economic growth in the United States, its main foreign market.  Rising exports have spurred increased industrial production, unemployment has fallen gradually, and now domestic demand has developed significant momentum.  The Mexican economy could still be derailed if the European debt crisis worsens and global confidence falters again.  With its momentum in manufacturing, however, Mexico may have more cushion than was previously thought.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1206 B


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