Mexico's factories contract at slowest pace in a year, still hurting

Market trading boards are seen at the Australian Securities Exchange in Sydney, Friday, February 9, 2018. ( AAP Image/Ben Rushton) NO ARCHIVING

MEXICO CITY (Reuters) – Business conditions for Mexico’s manufacturing sector deteriorated at their slowest pace in a year, though the rate of contraction was still sharp as the COVID-19 pandemic hampered factory orders and production, a survey showed on Monday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index rose to 45.6 in March from 44.2 in February, but remained well below the 50 threshold that separates growth from contraction.

There were widespread reports that business closures, due to coronavirus controls, caused contractions in factory output during March, according to the survey.

“The Mexican manufacturing sector was again hampered by COVID-19 restrictions, with business closures causing further reductions in sales and output. Subsequently, firms continued to lower input purchasing and employment. However, rates of contraction did at least slow,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

The overall fall was the slowest over the past 12 months, but sharper than any seen prior to that. And after reaching a one-year high in February, the overall level of business confidence fell in March to 55.8, from 58.2 in February.

“While the COVID-19 vaccination program lifted business confidence to a one-year high in February, growing concerns about a further wave of infections and the possibility that controls could tighten restricted sentiment in March. Uncertainty could further delay the recovery, dampening business investments and preventing job creation”, said De Lima.

Mexico’s economy is seen growing at a quick pace in 2021 and reaching pre-pandemic levels by the beginning of 2022, after suffering its steepest recession since the Great Depression of the 1930s last year, the finance ministry said on Wednesday.

The PMI index tracks developments on a range of business indicators including prices, new orders, output, employment, suppliers’ delivery times and stocks of raw materials.

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