MexECON Blog

January PMI Surges to 22-Month High

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

PMI 1501

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