Mexican factories expand for second straight month, inflation pressures subside

MEXICO CITY (Reuters) – Mexicos manufacturing sector grew for a second straight month in March as firms hired workers, supply-chain pressures eased, and input cost inflation slowed to a 1-1/2-year-low, a survey showed on Monday.

The S&P Global Mexico Manufacturing Purchasing Managers Index was a seasonally-adjusted 51.0 in March, unchanged from February, and above the 50 threshold that separates growth from contraction.

“Further increases in new orders and employment during March bode well to the near-term outlook for production, which could rebound in the coming quarter should demand conditions continue improving,” said Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. “For now, the PMI results continued to point to a broad stability of output volumes,” she added.

Mexico‘s manufacturing sector shrank for over 2-1/2 years from March 2020 due to the economic fallout of the COVID-19 pandemic. The index hit a record low of 35.0 in April 2020 at the height of the country’s pandemic-related lockdowns.

“Inflation was less of a drag on the performance of the sector. With input costs rising at the weakest rate in a year-and-half, amid reduced pressure on supply chains, companies stepped up input purchasing in March,” said De Lima.

Consumer prices in Mexico, Latin Americas no. 2 economy, rose less than expected in early March, with annual headline inflation easing to 7.12% from 7.48% in the second of half of February.

“Survey participants were confident that price pressures would recede further over the course of the coming 12 months, supporting output growth,” De Lima said.