Mexico’s manufacturing sector growth decelerates in April

Mexican manufacturing sector growth decelerated in April after accelerating to a five-month high in the prior month. The seasonally adjusted Markit Mexico Manufacturing PMI dropped from 51.5 in March to 50.7 in April. The recent reading indicated towards a marginal improvement in overall business conditions.

A renewed decline in production was mainly responsible for the subdued performance of the sector as a whole. Decrease in output showed weakness in client demand, according to anecdotal evidence. Even if the data hinted that new orders had continued to increase in April, the pace of growth decelerated to a moderate pace, noted Markit.

However, the increase in total new business came with growth of new export orders. Meanwhile, manufacturing employment in Mexico continued to increase, although just slightly. But a larger workforce was not able to ease pressure on operating capacity. Instead, backlogs of work were accumulated at the most rapid rate in five-and-a-half years. Firms have blamed the non-availability of raw materials.

This was seen in the lack of purchasing activity in April. Input purchasing dropped for just the third time in the survey’s history, while stocks of pre-production items widely stagnated. Some companies chose to respond to incoming new business by selling from existing stocks of finished goods, stated Markit.

Mexican manufacturers faced significant cost pressures in April. The pace of input price inflation alleviated to a 16-month low; however, it was still marked overall. Surveyed companies attributed higher costs to currency weakness against the U.S. dollar. Subdued growth and increasing prices in the latest period was unsuccessful in dampening manufacturers’ positivity regarding the year ahead in April.