Mexico's August purchasing mangers index for the manufacturing
sector fell to a seasonally-adjusted 50.7, after a revised 51.0 in
July. The reading for August was the weakest since mid-2009,
when the Mexican economy was just starting to recover from its
latest recession. The decline in August stemmed mostly from a
sharp drop in the subindex on new orders. That subindex
declined to 52.1 from 53.2 in July. In addition, the subindex
on production fell to 51.6 from 52.4 in the previous month.
The subindex on inventories declined to 49.6, while the subindex on
employment decreased to 50.6. In contrast, the subindex on
supplier deliveries rose to 46.5 in August from 45.5 in July.
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. The low reading for August is
especially disappointing against the backdrop of a very strong
reading for the U.S. manufacturing index in the same month and a
modest strengthening in exports over the summer. That
suggests Mexican factories are being impacted by domestic problems
such as tight government spending and a very weak construction
sector. The apparent acceleration in the U.S. economy and a
recent weakening in the peso could keep exports rising in the
coming months, but it is not clear whether that would be enough to
offset the problems in domestic demand. Mexican manufacturing
could remain sluggish for a while yet.
Patrick Fearon, CFA
Vice President, Fund Management