MexECON Blog

February PMI Rises to 53.2

Mexico's February purchasing managers index (PMI) for the manufacturing sector rose to a seasonally-adjusted 53.2, after revised figures showed a sharp drop to 51.6 in January.  The subindex on new orders rose to 54.5 in February, after plunging to 51.2 in January, and the subindex on production rose to 55.9 from 54.1.  The subindex on employment edged up to 53.0 from 52.9 in the previous month, while the subindex on supplier deliveries jumped to 51.9 from 46.2.  The only subindex to decline in February was the one on inventories.  That subindex fell to 52.6, after a reading of 53.5 in the previous month.  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 therefore suggests Mexico's factory sector is again growing broadly.  Nevertheless, recent downward revisions in the index and the tepid reading in January seem to reflect the softness that has been evident in the overall economy.  A good rise in manufacturing exports during the fourth quarter kept Mexican factories humming through the end of the year, but foreign sales fell sharply in January, helping explain the weakness in the PMI during the first month of 2013.  Unemployment has risen in recent months, and December retail sales fell dramatically.  Construction activity has been falling since last summer.  Even though today's report suggests the manufacturing sector has now rebounded a bit, it might require a couple of months of additional data to determine whether the slowdown in Mexico is just a temporary setback caused by short-term concerns (such as the transition to a new president or fiscal tightening in the United States), or whether it is the beginning of a deeper, more serious correction after several years of extraordinary growth.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1302

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