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Mexico: Manufacturing production and employment contract at record rates

Christian Fernsby ▼ | December 4, 2019
Following a mild improvement in the health of the manufacturing industry in October, economic conditions took a turn for the worse.
Mexico city
LatAm economy   Business confidence sank to a series low, dampened by future uncertainty
November saw a renewed decline in sales contribute to the quickest contractions in production, input buying and employment since the survey started in April 2011.

Topics: Mexico

Concurrently, business confidence sank to a series low, dampened by future uncertainty.

Subdued demand conditions also acted to attenuate price pressures.

Input cost inflation softened to the slowest in the over eightand-a-half-year survey history, while manufacturers reduced their charges.

At 48.0 in November, the seasonally adjusted IHS Markit Mexico Manufacturing PMITM signalled a modest deterioration in operating conditions.

The headline figure was down from 50.4 in October to its lowest mark since the inception of the survey.

Amid reports of falling sales, machinery issues and economic woes, manufacturing production contracted in November.

The reduction in output was the sixth in consecutive months and the fastest on record.

Despite falling moderately, new business inflows posted the second-sharpest contraction in the survey history, beaten only by that noted mid-year.

Projects pending approval, fewer customer orders, competitive pressures and economic troubles were among the reasons listed by panellists for the decline in sales.

Weak demand from external markets contributed to the drop in total orders, as seen by a solid reduction in new export business midway through the final quarter of 2019.

Faced with fewer orders, Mexican goods producers worked through their backlogs and lowered headcounts.

Outstanding business declined at a slight pace that was the quickest since February, while the rate of job shedding was the fastest in the history of the survey.

Anecdotal evidence pointed to the termination of temporary contracts, downsizing and reduced working hours.

Spending on input buying was likewise curtailed during November.

Not only did quantity of purchases fell for the ninth month running, but also at the quickest pace on record.

As a result, input holdings declined, after accumulation had been noted in October.

The pace of stock depletion was moderate, but the quickest in the survey history.

Although post-production inventories continued to increase, the pace of expansion eased to a five-month low and was marginal overall.

Subdued sector conditions dragged the rate of input cost inflation to a survey low, with companies in turn lowering their selling prices.

Lastly, business confidence dipped to its lowest level in the series history, with a number of survey participants concerned about market uncertainty and the state of the domestic economy.