Mexico manufacturing sector declines in August

Mexico’s manufacturing sector experienced a significant decline in August 2024, with the S&P Global Mexico Manufacturing Purchasing Managers’ Index (PMI) dropping to 48.5, its lowest level in two years. This marks the second consecutive month of deteriorating business conditions, driven by a sharp downturn in new orders and production.

The contraction in new orders accelerated to the fastest pace in two years, as intense competition from China, liquidity challenges, and delayed project approvals contributed to the decline. Additionally, international sales plummeted, particularly due to reduced orders from the US, further exacerbating the sector’s struggles.

The impact of these challenges led to a reduction in employment for the fourth consecutive month, as firms shed jobs and scaled back inventory levels due to weaker demand. Despite the weak market, input costs surged to a 21-month high, driven by peso depreciation and material shortages, although the increase in selling prices remained modest.

The outlook for the sector is increasingly uncertain, with concerns about competition, highway insecurity, and unpredictable public policies in the US and Mexico dampening business confidence and potentially restricting future investments.

Attribution: S&P Global Mexico Manufacturing PMI®

Subediting: M. S. Salama