Mexican manufacturing PMI levels remain in contraction territory in December

Manufacturing industry in Mexico remained in contraction in December 2018, with further reductions in output and purchasing levels matched by renewed falls in jobs and stocks of purchases. The headline IHS manufacturing PMI index stayed unchanged in December from the mid-quarter reading of 49.7, hinting at a second straight fall in the sector’s health.
Production fell because of a combination of weak demand, competitive pressures, input shortages, planned maintenance and the annulment of contracts. The rate of reduction was slight, however, and weakened from November. A further mild rise in new work was registered in December. Growth was supported by product diversification, though curtailed by unwanted stock accumulation at clients and soft sales, in part arising from high tariffs on steel.

New export orders rose for the 10th straight month, but at the second softest rate in this sequence. Weak demand conditions led to a renewed contraction in manufacturing employment. Companies noting lower payroll numbers recorded high churn rates, while those that took on extra staff cited the hiring of temporary labor. In all, the rate of job shedding was fractional.

Purchases’ quantities fell for the second consecutive month in December, but at a weaker rate. The downturn was led by lower production requirements at some plants, though curtailed by additional purchasing at firms that sought to advance from reduced prices for some materials. 

Meanwhile, inflation moderated to the softest in 15 months. The sustained rise in purchasing prices was largely linked to peso depreciation against USD, with companies citing higher chemical, food, metal, plastic and textile costs in particular. Selling prices were lifted as a consequence, but here too a moderation in inflation was recorded. Business confidence fell to its lowest level since data became available in April 2012, with companies worried about security and political issues, and signs of an easing economy.