MexECON Blog

December PMI Remains at Record High

Mexico's December purchasing managers index (PMI) for the manufacturing sector came in at a seasonally-adjusted 54.9, matching the all-time record in November.  According to the report, the subindex on production rose in December to a 17-month high of 57.7, while the subindex on new orders rose to 23-month high of 57.1.  The subindex on employment was steady at a record high of 53.8.  The only subindexes to post declines in December were the ones on inventories and supplier deliveries.  The subindex on inventories edged down to 51.7, and the subindex on supplier deliveries fell to 47.4.  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 the index remaining at a record high, it suggests Mexico's factory sector is still growing very broadly.  In fact, Mexico is posting much stronger PMI readings than most other large economies.  The only fly in the ointment is that other recent reports from Mexico have been much weaker.  Mexican exports have been softening since last summer, and industrial production has pulled back.  Unemployment has rebounded to its highest level since last spring, threatening to undermine consumer spending.  Mexico's strong PMI is also at odds with the apparent slowdown in the U.S. economy toward the end of 2012 and the continuing threat from the European debt crisis.  It is true that Mexico is now much more internationally competitive than it was just a few years ago, which bodes well for its exports and manufacturing industry.  However, only time will tell whether the strong PMI or the weak trade and industrial data provides the truer picture of where Mexico's economy is going in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1212

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