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More Mexican business managers feel now is a good time to invest

Mex Prod Conf Subs Jan 13Enlarge Graph

The latest Producer Confidence Survey (IPC) showed managers were less negative about investing in Mexico. The IPC is a monthly survey covering the manufacturing sector in Mexico and aims to quantify the confidence business managers have on the economy. The questions probe their expectations for the future as well as their perception of the present. The questions have relative answers, such that the possible answers to every question are qualitative versus the previous period (e.g. much better, better, neutral, worse, much worse).

The chart above shows the five key questions of the survey and how their answers varied with respect to the previous month. Most factors remain optimistic (i.e. above 50) with only marginal changes. The big mover was the question of whether or not now is a good time to invest in Mexico. Although the general feeling is still pessimistic (with a rating below 50), the data still shows a jump of 3.6 points to reach 46.1, meaning that more business managers are thinking that now is a good time to invest than before. Nonetheless, the majority still feel it is not a good time, though the fast change in perception is what stands out.

Mexico has had several mixed macroeconomic indicators, such as lower unemployment and higher producer confidence but at the same time a lower value in the purchasing managers index and declining industrial production. Investors in Mexican ETFs (e.g. EWW or NAFTRAC) currently lack solid data to convince them to buy or sell. The data in this survey is in favor of a more optimistic outlook, though investors will have a better outlook when more February data is released.

Mexico’s economy is closely linked to that of the U.S. and is therefore dependent on it, but at the same time Mexico forms part of the wider Latin American business community, making it much harder to get a clear reading based on its neighbors. Latin America focused ETFs are usually weighted heavily on Mexico, therefore investors in GML, ILF and LATM should also keep a close eye on Mexican developments.