Mexico's November purchasing managers index (PMI) for the
manufacturing sector rose to a seasonally-adjusted 52.3,
significantly stronger than the revised readings of 51.2 in both
October and September and 50.8 in August. The index now
stands at its highest level since May. The rise in November
reflected increases in each of the five subindexes. The
heavily-weighted subindex on new orders jumped to 54.2 in November
from 51.9 in October, while the subindex on production rose to 54.2
from 53.3. The subindex on inventories posted a healthy gain
to 53.2, while the subindex on employment rose slightly to
51.2. The subindex on supplier deliveries also posted an
increase, though it remained relatively weak at 46.7.
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
growing broadly again after hitting a weak spot in mid-2013.
The rebound in the PMI is consistent with other recent data
suggesting that at least parts of the Mexican economy are
recovering from their slowdown earlier in the year. For
example, Mexican gross domestic product (GDP) returned to growth in
the third quarter after declining in the second quarter.
Exports have started to firm, and unemployment is again trending
downward. Nevertheless, the PMI is still weaker than it was
last year at this time, and it is not yet clear whether it will
rebound much further. The Mexican economy is still facing
headwinds from tight government spending, weak construction, and
signs of tepid consumer demand. Until those issues are
resolved, it is not clear whether Mexican manufacturing can grow
Patrick Fearon, CFA
Vice President, Fund Management