Mexico's factories still reeling from coronavirus, pace of decline eases in August

MEXICO CITY (Reuters) – Mexico’s factories were still hurting in August from the coronavirus pandemic, with production falling and firms cutting workers, though the pace of deterioration in business conditions eased for a fourth straight month, a survey showed on Tuesday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index MXPMIM=ECI stood at 41.3 in August compared with 40.4 in July, still far below the 50-threshold that marks the boundary between contraction and expansion.

The index has been gradually recovering after plummeting to 35.0 in April, the lowest point in the survey’s nine-year history.

“Although production continued to trend towards stabilization in August, the severity of this prolonged decline is a cause for concern, particularly as firms are still experiencing marked declines in new orders,” said IHS Markit economist Eliot Kerr.

The PMI data comes on the heels of the steepest quarterly decline in Mexican gross domestic product since the 1930s Great Depression, after the economy shrank 17.1% in seasonally adjusted terms in the April-June period from the prior quarter.

Mexico’s economy, Latin America’s second largest, could contract by almost 13% this year, the central bank warned on Wednesday.

“The ongoing demand weakness has translated into further job losses, which will only put more strain on economic conditions going forward. That view is aligned with firms’ expectations for a continued downturn over the next 12 months,” said Kerr.

After shedding some 1.1 million tax-paying jobs registered with the Mexican Social Security Institute between March and June, Mexico had by the third week of August recovered nearly 67,000 formal jobs.

But Kerr pointed out that while sentiment improved again in the survey, participants expect activity to fall over the coming year, “making large scale re-hiring unlikely in the short term.”

The PMI index is composed of five sub-indexes tracking changes in new orders, output, employment, suppliers’ delivery times and stocks of raw materials.

Source: Read Full Article