Mexican New Orders Up in July, but Growth Rate at Four-month Low
Mexican manufacturing business conditions improved strongly in July, with greater demand often cited by survey respondents.
Growth of both output and new orders remained robust, despite having weakened from June, and encouraged firms to take on more staff. Inflationary pressures meanwhile eased, with the latest increase in costs the slowest in a year.
The headline figure derived from the survey is the Manufacturing Purchasing Managers’ Index™ (PMI™). After adjusting for seasonal variation, the PMI remained above the 50.0 no-change mark in July, signalling a further improvement in manufacturing business conditions.
At 55.2, down from 55.9 in June, the PMI indicated a robust improvement in overall operating conditions, and was stronger than the series average.
Mexican manufacturers received a larger volume of new orders in July, continuing the trend that has been registered in each month since data collection began in April 2011. That said, the increase generally reflected greater domestic demand as new export orders rose only marginally over the month.
Overall, total new work intakes increased markedly in July, but the rate of growth was nonetheless the slowest in four months.
Reflective of the increase in new orders, firms raised output and depleted their stocks of finished goods during July. Notably, inventories of post-production goods fell sharply, with the rate of decline the strongest in the 16-month series history.
Concurrently, backlogs of work fell for the seventh month running, albeit only marginally.
Employment in Mexico’s manufacturing sector rose further during July, with approximately 15% of panelists hiring additional staff from June. Firms generally linked job creation to greater production requirements.
Employment rose strongly over the month, with the rate of growth the fastest since June 2011. The quantity of inputs bought by manufacturers rose markedly in July, while stocks of purchases fell for the first time in six months. Suppliers’ delivery times meanwhile lengthened for the thirteenth consecutive month.
Input costs faced by manufacturers rose markedly in July. Higher oil and gas prices, and unfavourable exchange rates both contributed to the latest rise in costs. However, the rate of input price inflation slowed from June to its slowest pace in a year.
Sergio Martin, Chief Economist at HSBC in Mexico said: “The HSBC Mexico Manufacturing PMI index remained at a strong level of 55.2 in July, slightly down from the previous month. This suggests that the manufacturing sector, which depends to a great extent on external
demand, continues to show resilience to global headwinds.
“However, if a slowdown in the US manufacturing sector consolidates, we would expect Mexico’s industrial sector to follow suit.”