MexECON Blog

July PMI Falls to 51.6

Mexico's July purchasing managers index (PMI) for the manufacturing sector fell to a seasonally-adjusted 51.6, compared with revised readings of 51.8 in June, 52.5 in May, and 52.7 in April.  The index is now at its lowest level since last October.  According to the report, the decline in July stemmed entirely from the heavily-weighted subindex on new orders.  That subindex fell for a fourth straight month, reaching a nine-month low of 52.8.  In contrast, the July subindex on supplier deliveries rose to 45.9, while the subindex on employment edged up to 51.7.  The July subindex on inventories rose 53.3, and the subindex on production rose to 53.4.

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.  Therefore, in spite of the declines over the last several months, the index suggests Mexico's factory sector is still growing.  Mexican manufacturing activity clearly got a boost earlier this year when exports started to rebound.  The recent strengthening in U.S. demand suggests exports will continue to buoy factory activity.  Nevertheless, the three straight declines in the overall PMI and the four straight declines in the subindex on new orders should serve as a reminder that Mexico is still facing some significant headwinds.  In particular, several aspects of domestic demand remain weak.  That will likely limit how much the overall Mexican economy can accelerate in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

PMI 1407

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