MexECON Blog

March PMI Rises to 54.2

Mexico's March purchasing managers index for the manufacturing sector rose to a seasonally-adjusted 54.2, after revised readings of 53.6 in February and 51.8 in January.  Prior to that, the PMI had stood at a near-record 54.6 in each of the final two months of 2012.  The increase in March came mostly from a jump in the subindex on new orders.  That subindex surged for a second straight month, reaching a 26-month high of 58.1.  The subindex on production rose to 56.4, and the subindex on factory employment increased to 52.3.  In contrast, the subindex on inventories fell modestly to 52.0, and the subindex on supplier deliveries dropped sharply to 44.7 from 50.4 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 suggests Mexico's factory sector is again growing broadly.  Other recent reports suggest exports, hiring, and retail sales have also at least partially rebounded from their soft spot at the turn of the year.  That soft spot partly reflected caution concerning the December inauguration of Mexico's new president and fear of the U.S. "fiscal cliff" in January.  Now that the new administration is in place and the fiscal tightening in the United States has proven more modest than feared, it is no wonder that the Mexican economy is regaining strength.  Nevertheless, Mexico is still facing more economic challenges than during the earlier phases of the expansion.  U.S. economic growth is still relatively weak, and growth is even weaker or negative in many other key developed countries.  If the European debt crisis flares up again, it could undermine confidence and weigh on activity all around the globe.  Mexico is even facing slower growth in some domestic economic sectors.  Things are starting to look better than at the beginning of the year, but there are significant risks to the downside.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1303

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