Mexico's March purchasing managers index (PMI) for the
manufacturing sector fell slightly to a seasonally-adjusted 52.1,
after revised readings of 52.2 in February and 52.4 in each of the
three months before that. The decrease in March stemmed
entirely from a fall in the subindex on production. That
subindex declined to 52.9 from 54.2 in February and 55.8 in
January. On a more positive note, the March subindex on
manufacturing employment was steady at 51.6, while the subindex on
new orders rose to 54.4. The subindex on supplier deliveries
increased to a 13-month high of 47.4, and the subindex on
inventories jumped to 52.1.
The report was released Wednesday 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 fairly broadly again after a weak spot in mid-2013.
One positive development for Mexican manufacturers has been that
the country's exports rebounded in February, and many observers
have begun to expect U.S. demand to strengthen into the spring
after bad weather disrupted business during the winter.
Nevertheless, domestic demand in Mexico continues to face big
challenges. Residential construction is in a deep freeze,
public works activity is sluggish, and consumer demand is
tepid. Those problems may limit how much the manufacturing
sector can grow in the near term.
Patrick Fearon, CFA
Vice President, Fund Management