Factories in Mexico show growth for 2nd consecutive month
In Mexico, the manufacturing sector expanded in March, showing growth for a second straight month. Reports showed that companies hired more workers while supply-chain pressures eased considerably in the country. Moreover, input cost inflation dropped to a 1-1/2-year low.
In March, the S&P Global Mexico Manufacturing Purchasing Managers’ Index stood at 51.0. It remained at the same level as in February. The index is above the 50 thresholds. That’s important because the latter separates growth from contraction.
Pollyanna De Lima, the economics associate director at S&P Global Market Intelligence, stated that the number of new orders increased during March. The strong employment data bodes well for production growth in the near term. It could rebound in the coming quarter, especially if demand conditions improve further. However, the PMI results show that output volumes are broadly stable for now.
Mexico’s manufacturing sector has struggled since the pandemic
The manufacturing sector declined for more than 2-1/2 years in Mexico. The process started in March 2020 when the coronavirus pandemic caused the economic fallout. Consequently, the index plunged to a record low, reaching 35.0 in April 2020.
However, the country has been rebounding since then. In early March, consumer prices increased less than expected, but inflation slowed considerably. According to the reports, annual headline inflation dropped from 7.48% to 7.12% in the second half of February.
De Lima noted that inflation hasn’t weighed on the sector much over the last months. In fact, input costs are increasing at the slowest rate in a year and a half. Moreover, pressure reduced considerably on supply chains, especially after companies actively started input purchasing in March.
Furthermore, a new survey showed that investors and traders are confident that price pressures will recede further over the next year. That news also supports output growth. Overall, Mexico’s manufacturing sector seems on track to gain further in the coming months.
