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Mexico’s Manufacturing Growth Rebounded in July

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Mexican equity rose on a positive manufacturing report

The iShares MSCI Mexico Capped ETF (EWW) tracks Mexican equities, such as America Movil (AMX) with a ~16% allocation in the fund, Grupo Televisa (TV) with an ~8% allocation, and Cemex (CX) with a ~4.5% allocation. The ETF gained 0.18% on August 4 on positive economic indicator news from the region. However, EWW is down 5% so far this year.

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Mexico to grow between 3.2% and 4.2% in 2015

Falling oil prices (OIL) and the economic slowdown in the world’s (ACWI) major economies have had repercussions in Mexico. The Mexican peso fell by 13.1% in 2014. However, the weak currency, which made imports expensive, also helped the dollar value of Mexican exports increase. Improving domestic demand and net exports have helped the Mexican economy improve since Q4 2014. Exports account for about one-third of Mexico’s gross domestic product.

Consequently, the Markit Mexico Manufacturing PMI (purchasing managers’ index) recorded a sharp rebound in July, led by new export orders. Mexico’s Ministry of Finance estimates the economy will grow between 3.2% and 4.2% in 2015.

Mexico’s manufacturing PMI at 52.9 in July

A fast-paced increase in new export orders and new product launches led Mexico’s manufacturing PMI to 52.9 in July. The report was released by Markit Economics on August 3. June had recorded a 52.0 level, the lowest in the previous 11 months. Manufacturing growth in Mexico has been expanding consistently since October 2013.

With the currency exchange rate in favor of Mexico, the economy “looks well set to remain in expansion mode through the second half of the year,” said the report.

While Mexico’s manufacturing seems to be on track, Brazil’s manufacturing remains unsteady. The August 3 manufacturing PMI report only added to Brazil’s woes.

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