Mexican Manufacturing Index Contracts to Record Low

(Bloomberg) -- Mexico's manufacturing industry contracted at the sharpest pace since 2011, according to the IHS Mexico Manufacturing PMI survey. The overall manufacturing gauge dipped to 49 -- the lowest point in about eight-and-a-half years of record keeping and the third consecutive monthly contraction.

“The latest PMI figure highlighted the fastest deterioration in the health of the sector since data collection started,” said Pollyanna De Lima, economist at IHS Markit. Firms linked the downturn partly to weak production and contracting sales.

Weak domestic demand was reflected by the lowest new orders index since the survey's inception. Orders from abroad showed a positive development in August by reversing two months of contraction.

Mexican manufacturers marginally cut employment in August after showing no change in June and July. Manufacturing sector employment has not grown since February, according to the index.

Factory input prices rose at the fastest pace in seven months as peso weakness against the U.S. dollar and tariffs reportedly pushed up costs of chemicals, foodstuffs, metals and plastic for Mexican producers. Companies refrained from passing along the higher prices. A reported 96% of surveyed manufacturers left their prices unchanged.

The three-month average future business sentiment index is down about seven points from last August to the lowest reading in the series history as optimism wanes.

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