Survey-record contractions in input purchasing and employment in Mexico
Christian Fernsby ▼ |
May data painted a mixed picture of the health of the Mexican manufacturing industry.
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On the bright side, new order growth was sustained and there were renewed increases in production and exports.
Rates of expansion were marginal at best.
At the same time, cashflow issues and subdued sales resulted in the fastest contractions in employment and input purchasing since data collection started in April 2011.
Cost burdens and selling prices rose further, but at slower rates than their respective long-run averages.
Operating conditions were unchanged in May, as signalled by the seasonally adjusted IHS Markit Mexico Manufacturing PMITM recording at the 50.0 no-change mark.
This followed from a fractional strengthening in the health of the sector at the start of the second quarter, and compares with improvements through most of 2018.
Incoming new work increased for the second consecutive month in May, albeit marginally.
There were some reports of higher sales, but a number of survey members commented on sufficient stock levels at clients, auto-sector weakness and subdued demand conditions.
International sales rose midway through the second quarter, with panellists reporting greater client numbers abroad and higher new orders from Central America.
That said, the pace of growth was only slight.
Similarly, there was a marginal increase in manufacturing production, following contractions in each of the previous two months.
Still, manufacturers lowered payroll numbers and input buying again in May.
Rates of contraction were the quickest in the survey history, despite being modest.
Anecdotal evidence pointed to cost-reduction initiatives amid cashflow issues and weak underlying demand.
Inventory trends differed in May.
Pre-production stocks declined for the fourth time in the past six months, whereas holdings of finished goods increased for the second time in as many months.
Border issues, coupled with material shortages, continued to affect suppliers in May.
Average delivery times lengthened for the sixth consecutive month.
Input costs in the manufacturing industry increased in May amid reports of higher prices for chemicals, foodstuff, metals and plastics.
Companies also linked inflation to peso weakness.
As a result, selling prices were raised for the second straight month in May.
Rates of inflation for both price measures remained below their respective long-run averages.
Mexican manufacturers retained optimistic projections regarding the 12-month outlook for production.
The level of positive sentiment improved to a three-month high, but remained below its long-run average.
Confidence was attributed to plans to expand capacity, launch new products and advertise. ■
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