Mexico's October purchasing managers index (PMI) for the
manufacturing sector fell to a seasonally-adjusted 50.8, after
revised readings of 51.1 in September and 50.7 in August. The
fall in October came mostly from a big drop in the
heavily-weighted subindex on new orders. That subindex fell
to a four-year low of 51.4, compared with 52.5 in the previous
month. The October subindex on inventories fell to 51.3,
while the subindex on employment edged down to 51.0. The
subindex on supplier deliveries decreased marginally to 46.2.
In contrast, the October subindex on production rose for a second
straight month. It increased to 52.8, following readings of
52.4 in September and 51.8 in August.
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. At its
current level, the index suggests Mexico's factory sector is still
growing, but only narrowly. Mexican manufacturers continue to
face both weak demand abroad and outright declines in some sectors
of the domestic economy. In addition, last month's partial
shutdown of the U.S. government raised concerns about future
demand, which probably explains much of the sharp drop in new
orders during October. The Finance Ministry last week
released data suggesting the Mexican economy returned to growth in
the third quarter after a decline in the second quarter, but the
detailed, official figures will only come on November 21.
Whether or not that report confirms the Finance Ministry's
optimism, a wide range of reports suggests the Mexican economy is
still facing strong headwinds, and the country's factory sector may
not be able to reaccelerate substantially for a while yet.
Patrick Fearon, CFA
Vice President, Fund Management