Mexico's May purchasing managers index (PMI) for the
manufacturing sector fell to a seasonally-adjusted 52.7, down from
the revised 52.9 in April but still above the 52.5 reading in
March. The pullback in May reflected declines in four of the
five subindexes, including the heavily-weighted subindexes on
production and new orders. The subindex on production fell to
53.8, compared with 55.2 in April and 53.4 in March. The
subindex on new orders declined only slightly to 54.2 from 54.5 in
the previous month. The May subindex on inventories edged
down to 52.6, and the subindex on employment decreased to
51.0. In contrast, the subindex on supplier deliveries rose
in May, reaching 47.3.
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. In spite
of the pullback in May, the index suggests Mexico's factory sector
is still growing broadly again after a weak spot in mid-2013.
That probably reflects the recent upswing in exports, as the U.S.
economy regains its footing. If the U.S. economy keeps
accelerating as many observers expect, the Mexican factory sector
could keep growing well. There have also been some positive
signs for domestic demand in Mexico. Those improvements have
been too small and tentative to contribute much to the factory
sector so far, but if retail spending and other aspects of domestic
demand solidify soon, the manufacturing sector could improve
Patrick Fearon, CFA
Vice President, Fund Management