Fri, 12 Aug 2022

Mexican manufacturing falls as inflation raises prices

Robert Besser
01 Aug 2022, 20:34 GMT+10

MEXICO CITY, Mexico: Rising costs due to inflation resulted in Mexico's manufacturing sector declining in July, despite hopes for a recovery.

The S&P Global Mexico Manufacturing Purchasing Managers' Index, released this week, fell to 48.5 in July from 52.2 in June.

Of note, since March 2020 Mexico's manufacturing index has largely remained below the 50-point threshold that separates growth from contraction.

The index reached a new low of 35.0 in April 2020, at the beginning of Mexico's Covid restrictions.

Newly released information showed a July drop in factory orders and lower sales, attributed to an ongoing drought, input shortages and inflation.

There has also been a small decrease in employment following the drop in manufacturing.

"Companies are now reporting trepidation over their financials, a factor which restricted input buying and led to the non-renewal of temporary contracts," said Pollyanna De Lima of S&P Global Market Intelligence, as quoted by Reuters.

Business confidence has also fallen, with almost one-quarter of those surveyed predicting manufacturing levels would continue to fall in the next 12 months, De Lima added.

"Solvency concerns, alongside supply-chain constraints, the war in Ukraine and acute price pressures stifled business confidence in July."

Meanwhile, Mexico saw a record interest rate increase in June, in a bid to control inflation, with more hikes expected.

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