Mexico Factory Activity Rises to 16-Month High

Activity in Mexico’s manufacturing sector increased in September to a 16-month high on the back of stronger output and new orders, a survey showed late Monday.

The Markit Mexico Manufacturing Purchasing Managers’ Index rose to 52.8 in September from 52.2 in August, when adjusted for seasonal swings. A reading above 50 signals expansion in the sector, while a reading below that points to contraction, Reuters reported.

“The latest set of PMI data show that economic conditions in Mexico remained on an upward trajectory, with factory output expanding in tandem with strong inflows of new work,” said Pollyanna De Lima, principal economist at IHS Markit and author of the report.

The report said that manufacturing conditions in Mexico continued to improve at the end of the third quarter. A marked and accelerated expansion in factory orders underpinned a robust upturn in output, as jobs were created over the month and firms purchased greater quantities of inputs.

Rising manufacturing activity likely helped boost gross domestic product growth in the third quarter.

“Buoyant demand for Mexican goods was evident domestically and externally, while businesses spent more on staff and quantities of purchases. These are additional signs that GDP growth will probably accelerate from the modest 0.6% rise noted in Q2,” said De Lima.

The September figure was the highest since May 2016, as output and new orders picked up. The PMI reading over the third quarter as a whole was the highest since the second quarter of 2016.

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

Mexico sends about 80% of its exports, which are mostly manufactured goods like cars and TVs, to the United States.

Trade negotiators from Mexico, Canada and the United States wrapped up on Wednesday a five-day session of talks in Ottawa to revamp the North American Free Trade Agreement, saying that progress had been made but acknowledging that much work remained to conclude the negotiations by the end of the year.

For more than 23 years, NAFTA has set the foundation for open, prosperous trade within North America, spurring economic growth and cooperation across three countries while serving as a global model to follow as the largest free trade agreement in the world. NAFTA’s future is now uncertain, largely based on the concern of trade deficits.