Mexico's January purchasing managers index (PMI) for the
manufacturing sector surged to a seasonally-adjusted 53.1, easily
surpassing the revised readings of 52.2 in December and 52.4 in
November. In fact, the reading for January was the highest
since March 2013. According to the report, the rise in
January stemmed mostly from a jump in the subindex on
production. That subindex rose to 55.1, compared with 53.7 in
December. In addition, the subindex on new orders rose to
54.7, while the subindex on supplier deliveries jumped to
47.3. The subindex on employment was steady at 52.1, while
the subindex on inventories edged down to 52.1.
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. With its
surge in January, the index suggests the Mexican factory sector was
growing quite broadly again at the beginning of 2015. That
comes in large part from the ongoing rise in Mexican exports.
Strengthening demand in the United States and a lower peso have
combined to prompt increased foreign sales of Mexican autos, auto
parts, and other manufactured goods. In addition, however, it
is clear that rising domestic demand is also a factor. For
example, a report yesterday showed Mexican businesses are boosting
their purchases of domestically-produced machinery and
equipment. An ongoing recovery in residential construction
and rising consumer demand are probably also helping out. If
the low peso makes foreign goods increasingly expensive, the
domestic demand for Mexican factory goods will continue to
rise. Because of this, I look for Mexico's manufacturing
sector to keep growing well in the coming months.
Patrick Fearon, CFA
Vice President, Fund Management