Mexican manufacturing sector’s operation conditions record weaker rebound in August

The Mexican manufacturing sector’s operating conditions saw a weaker rebound in August. The seasonally adjusted IHS Markit manufacturing PMI index fell to 50.7 in August, a ten-month low, from July’s 52.1. Renewed contraction in factory output was a major drag on the headline figure. The decline was the first in three months, with panellists citing shortages of some materials, cashflow difficulties and weak sales.

Although order book volumes continued to increase, the upturn was the slowest in the current ten-month sequence of growth. New export orders likewise rose at a softer rate in August. Those survey members that secured new work over the month showed that marketing efforts bore fruit, whilst there were also mentions of greater sales amid new product launches.

Scarcity of raw material and machinery breakdowns reportedly led to rises in unfinished business amongst goods producers. The rise in backlogs ended a six-month period of depletion, but was marginal overall.

The data for August underlined the increased stock-building efforts at manufacturers in Mexico, as input purchasing rose to a greater degree than seen in the preceding month. Evidence seen by survey participants showed that additional materials had been bought because of scheduled launches of new goods.

Inventories of raw materials and semifinished items rose, although just slightly. Concurrently, holdings of manufactured goods rose midway through the third quarter. While some companies mentioned that unsold goods had been placed into stocks, others commented on preparations for the sales of new products.

In the meantime, employment rose for the tenth consecutive month. The rate of job creation was moderate and the slowest since February. August saw a rise in manufacturing sentiment, with promotional activities, growth into new markets, forecasts of greater sales, favourable economic policies and domestic consumption all expected to support production growth in the year ahead. Optimism was at a four-month high.

The higher prices for steel, cellulose, some chemicals, plastics and textiles caused a further rise in overall cost burdens. Therefore, factory gate charges were raised again in August. Rates of input cost and output charge inflation eased, though remained above their respective long-run averages.