Mexican manufacturing sector weakens in March, PMI index falls to 49.8

Mexican manufacturing sector has showed signs of softness in March after recorded a strong recovery in the prior month. The seasonally adjusted IHS Markit Mexico manufacturing PMI index dropped to 49.8 from a 13-month high of 52.6 seen in February. March data underlined a renewed deterioration in business conditions throughout the sector.

Given a strong performance in February, the PMI averaged 51.1 in the opening quarter of 2019, compared to 50 in the fourth quarter of 2018. Adding to the downward movement in the headline figure was renewed contraction in output. Firms that recorded reduction cited weak sales, issues in production lines and an increasingly competitive environment. The pace of fall was slight overall.

New orders growth halted in March, ending a 16-month period of growth. Some companies associated lower sales with challenging economic conditions and competitive pressures. Nevertheless, this was countered by growth at firms that secured new work in the midst of the launch of new products and greater client bases. Export sales rose for the second straight month, albeit at a marginal and slower rate. About 90 percent manufacturers noted no change in external orders from February’s levels.

Weak inflows of new work along with downsizing, restructuring attempts and the non-replacement of voluntary leavers resulted in a renewed contraction in manufacturing jobs. However, the pace of job shedding was marginal overall. Mexican goods producers reduced their input buying in March, although marginally. The depletion in input stock followed from a revived rise in February.

Holding of finished items likewise fell, thereby ending a 10-month period of accumulation. The rate of fall was marginal, but the most rapid seen in just under six years. Input cost inflation weakened to a near six-year low. Increased prices for chemicals, paper, rubber, sugar and textiles were partially countered by lower charges for aluminium, steel and plastics. With input cost inflation and demand fading, selling prices were lowered for the first time since late-2014. However, the pace of price discounting was just marginal.