MexECON Blog

January PMI Rises to 52.7

Mexico's January purchasing managers index (PMI) for the manufacturing sector notched its fifth straight monthly increase, rising to a seasonally-adjusted 52.7.  The index for December was revised upward to 52.5.  The PMI is now well above its most recent low of 51.0 in July and August, and it stands at its highest level since last March.  According to the report, the January subindex on production rose to 56.1, for its highest level in more than a year.  The subindex on new orders rose to 54.9, while the subindex on employment increased to 51.6.  The subindex on supplier deliveries remained relatively low, but it still posted an increase to 46.6.  In contrast, the January subindex on inventories dropped to 50.2 from 53.0 in December.

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 a weak spot in mid-2013.  Unfortunately, even if more and more of Mexico's manufacturers are reporting increased activity, that's not necessarily the same as saying activity is growing at a faster rate.  Indeed, the latest industrial production report showed Mexican manufacturing output falling modestly through November.  Other recent reports have shown that while Mexico's overall exports were essentially flat in the final months of 2013 and into the beginning of 2014, the country's manufacturing exports were down.  These contradictory indicators on manufacturing serve as a reminder that, in spite of improvements in some indicators, the Mexican economy is still facing a number of headwinds, ranging from weak government spending, a frozen construction sector, tepid hiring, and lethargic consumer spending.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1401

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