Mexico's May purchasing managers index (PMI) for the
manufacturing sector rose to a seasonally-adjusted 52.4, compared
with unrevised readings of 52.1 in April and 52.3 in March.
According to the report, the partial rebound in May reflected
increases in four of the five subdinexes. The
heavily-weighted subindex on production rose to 54.4, and the
subindex on inventories jumped to a record high of 54.6. The
subindex on new orders rose to 54.0, and the subindex on employment
rose to 52.1. In contrast, the subindex on supplier
deliveries declined to a seven-month low of 45.2.
The report was released earlier this month 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 the Mexican factory sector is
still growing fairly broadly, though not as broadly as at the
beginning of the year. The main reasons for the softening
seems to be that exports have hit a lull and the recent recovery in
Mexican construction has slowed. Nevertheless, those
headwinds may well prove temporary. With the recent
indications of renewed economic strength north of the border and a
stronger labor market at home, there is a decent chance that
Mexican manufacturing will reaccelerate further in the coming
Patrick Fearon, CFA