Mexican Manufacturing Sector Sees Conditions Deteriorate

(Bloomberg) -- Mexico’s manufacturing industry contracted in June, according to the IHS Mexico Manufacturing PMI survey. The overall manufacturing gauge dipped to 49.2 -- the lowest point in 20 months. An index below 50 indicates contraction.

“PMI data for June showed a worsening performance of the Mexican manufacturing sector, rounding off the weakest quarter since the survey started in April 2011” said Pollyanna De Lima, economist at IHS Markit. Firms linked the downturn partly to trade tensions.

Weak domestic demand was reflected by the lowest new orders index since the survey’s inception. Orders from abroad contracted for the second time this year. According to survey participants, the downturn in international sales was linked to weak demand, tariffs and unfavorable exchange rates.

Mexican manufacturers did curtail cuts in employment. After falling for three months in a row, employment was unchanged in June.

Factory material prices rose at the fastest pace since January as peso weakness and tariffs reportedly pushed up costs for Mexican producers. But companies refrained from passing along the higher prices. A reported 96% of surveyed manufacturers reported no change in their fees due to concerns about weak demand.

Future business sentiment fell at the sharpest pace in a year- and-a-half and was second-lowest reading in the series history.

To contact the reporter on this story: Alexandre Tanzi in Washington at atanzi@bloomberg.net

To contact the editors responsible for this story: Alexandre Tanzi at atanzi@bloomberg.net, Chris Middleton

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