Mexican manufacturing growth accelerates in January; new work inflows boost output growth

Mexican manufacturers began 2018 on a strong footing, with solid inflows of new work boosting output growth and job creation. The IHS Markit Mexico manufacturing PMI indicated to a further strengthening of business conditions in the sector. The headline figure was a four-month high, showing stronger contributions from all of its five sub-components: output, new orders, stocks of purchases, employment and delivery times.

New orders continued to rebound from the earthquake-related contraction noted last October, rising for the third consecutive month in January. Businesses stated that the upturn was supported by the launch of new products and strong demand. Furthermore, the pace of growth accelerated from December was marked overall.

The rise in total new work was underpinned by growth of export sales. In spite of picking up since December, the pace of growth in new export orders was modest. The buoyant demand environment encouraged goods producers to scale up output, with the rate of growth the strongest in the current three-month sequence of growth. Part of the output was placed into manufacturers’ inventories, as hinted by a marked and accelerated increase in stocks of finished goods. The pace of accumulation was the steepest since the first month of data collection, noted IHS Markit.

Holdings of inputs rose further, and at a more rapid rate. This was because of a sustained upturn in purchasing levels. Input costs rose at a sharper rate amidst reports of higher prices paid for imported items and shipping. Therefore, output charges were increased to the greatest degree since June 2017. Manufacturers anticipated new projects in the pipeline, product diversification and marketing attempts to result in output growth in the year ahead. But, overall optimism was hindered by concerns about the upcoming elections and economic uncertainty.

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