MexECON Blog

October PMI Falls to 50.8

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

PMI 1310

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