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Mexico’s Manufacturing Improved at a Slower Pace in December 2015

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Mexico’s manufacturing PMI fell to 52.4 in December

Manufacturing activity accounts for ~18% of Mexico’s GDP. According to Markit, Mexico’s manufacturing PMI (purchasing managers’ index) declined by 0.6 points to 52.4 in December, compared to 53.0 in November 2015.

With this decrease in manufacturing, the iShares MSCI Mexico Capped ETF (EWW) fell by 1.5% on January 4, 2016. Mexican companies America Movil (AMOV), CEMEX (CX), Fomento Económico Mexicano (FMX)m and Coca-Cola FEMSA (KOF) fell by 1.4%, 6.1%, 1.6%m and 2.2%, respectively, on January 4.

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Commenting on the Mexico Manufacturing PMITM survey data, Tim Moore, senior economist at Markit and author of the report, said in a press release, “Mexico’s manufacturing sector was firmly in expansion mode during December, but overall growth eased to a three-month low and remains much weaker than seen at the start of 2015.

“Despite the reasonably solid flow of new business intakes, including a sustained upturn in export sales, manufacturers appear somewhat cautious about the near-term business outlook. As a result, inventory accumulation was only marginal at the end of the year, while manufacturers also reported the slowest pace of job creation for six months.”

Solid expansion in new order volumes

Although Mexico’s December upturn was the year’s slowest,  improvement in business conditions was demonstrated by a solid rise in incoming new orders. The increase in new orders was attributed to an expansion of export sales. Production increased in December, however, growth eased to a three-month low.

Staffing levels rose at slowest pace since June

With an increase in new orders, Mexican manufacturers increased their staffing levels. This led to a decline in outstanding work as well as the work backlog.

The rise in orders also kept input purchases higher. As a result, pre-production inventories increased in December. Also rising production levels led to an increase in the volume of finished goods held in stock.

Input cost inflation rose in December due to the depreciating Mexican peso as higher prices been paid for imported materials.

The Mexican economy showed improved performance in December. However, manufacturers were cautious about the near-term business outlook in December.

In the next article, let’s see how manufacturing activity in emerging economies could be impacted by global volatility.

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