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Modest improvement in Mexican manufacturing sector business conditions

Staff Writer |
Mexico’s manufacturing sector strengthened during May, with output, new orders and employment all expanding since the previous month.

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Although only marginal, the latest improvement in overall business conditions was the second-fastest since October 2016.

This was highlighted by the seasonally adjusted IHS Markit Mexico Manufacturing PMI – a composite indicator of manufacturing performance – rising to 51.2 in May, from 50.7 in April.

The latest reading was also slightly above the average seen in the first quarter of 2017 (51.0).

A return to rising production volumes helped to boost the headline PMI in May, which contrasted with the fractional fall in output during April.

However, the rate of expansion remained subdued in comparison to the average seen since the survey began in 2011.

A number of firms noted that weak demand from domestic clients had acted as a brake on production growth.

May data pointed to a moderate rise in overall new business volumes, which was supported by the strongest increase in export sales for three months.

Survey respondents attributed greater new business volumes to successful promotional activities and the launch of new products.

Sustained new business growth encouraged additional staff hiring in May.

Although only marginal, the rate of job creation picked up further from the 32-month low seen in March.

Some firms noted that a recovery in business confidence had supported employment growth in May.

More than half of the survey panel anticipate a rise in production volumes during the next 12 months, while only 5% forecast a reduction.

The degree of confidence regarding future growth prospects was the strongest since April 2016.

This was linked to forthcoming new projects and hopes of a rebound in client demand, especially in export markets.

Manufacturing firms reported a moderate increase in purchasing activity at their plants in May, which contrasted with the decline reported in April.

Higher levels of input buying were attributed to greater production requirements and efforts to boost inventories.

The latest survey indicated marginal rises in both stocks of purchases and postproduction inventories.

Meanwhile, strong cost pressures persisted across the manufacturing sector in May.

The rate of input price inflation picked up from April’s 16-month low, with survey respondents widely reporting higher imported raw material costs.

Squeezed operating margins resulted in upward pressure on factory gate prices.

The latest rise in manufacturers’ output charges was the steepest for three months in May.

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