Mexican manufacturing sector regains momentum in August, manufacturing PMI rises to 52.2

Mexico’s manufacturing sector regained some momentum in August after a slight deceleration of growth in July. The headline seasonally adjusted IHS Markit Mexico Manufacturing PMI rose to 52.2 in August from July’s 51.9, hinting at a sustained improvement in business conditions. The index has now recorded above the neutral 50 value in each of the past 47 months. Notably, the latest upturn in the health of the sector was the second-strongest since May 2016. Improved rates of output and new order growth were the main factors leading to the higher PMI reading in August.

Production rose for the fourth straight month in August, and at the second most rapid rate since October 2016. Growth was largely linked to higher intakes of new work that rose at a strong and higher pace in August. Stronger growth in total new business was underpinned by a renewed rise in export sales, following a slight drop in July. Moreover, greater sales from overseas were reportedly aided by solid demand and a favourable exchange rate.

Greater production schedules led to the most noted rise in purchasing activity and accumulation of pre-production inventories since May 2016. Stocks of finished goods also rose in August and at a the most rapid pace since January, with companies citing positive demand projections as the driving force behind growth. Stronger demand for inputs signify that delivery times lengthened a bit in August.

The pace of job creation stayed robust in the month, with several panellists reporting the employment of temporary workers. The need for a larger workforce also coincided with higher volumes of outstanding business, with backlogs of work growing for the first time in four months. Input prices rose at the slowest pace for over three years in August.

Respondents repeatedly linked this to a more favourable exchange rate against the U.S. dollar, which added to lower import costs. Meanwhile, companies increased their output prices at the weakest rate since July 2016. Optimism towards the year ahead firmed in August due to positive demand conditions. Nearly 53 percent of respondents expect output volumes to expand in the next year.

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