Mexico manufacturing shrinks for 20th month due to supply bottlenecks

MEXICO CITY, Nov 1 (Reuters) - Mexico’s manufacturing sector moved closer to the break even point in October but still contracted for the 20th month in a row, as global supply chain bottlenecks led to raw material shortages, a survey showed on Monday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index rose to 49.3 in October from 48.6 in September, below the 50 threshold that separates growth from contraction.

The index has consistently remained below that threshold every month since March 2020 and plummeted to 35.0 in April 2020 amid the fallout from the coronavirus pandemic, in what was by far the lowest reading in the survey’s 10-year history.

Even though October’s reading was the second highest since the coronavirus pandemic hit Mexico, according to survey participants, the new downturn that stemmed from the pandemic and business closures also suffered from a lack of raw material and new work.

“The key element behind the disappointing readings for most indices of the PMI survey was raw material shortages. Such issues restricted input purchasing, caused further declines in inventories, dampened production and triggered delivery delays,” said Pollyanna De Lima, economics associate director at IHS Markit.

Companies surveyed underscored that the raw material scarcity influenced purchasing decisions among their clients, who often postponed purchases believing items would not be distributed in a timely manner.

Additionally, input cost inflation hit a 39-month high and charges increased for the first time in over two years, with panel members reporting that some orders were lost as clients were reluctant to pay more for certain goods.

“On the bright side, the survey showed slower rates of contraction in new orders, stocks, quantity of purchases and employment. Parallel to this, there was a substantial improvement in business confidence,” said De Lima.

Firms expect supply-chain constraints to ease in the coming year and the pandemic to recede further, which they hope will underpin output growth, De Lima added. (Reporting by Anthony Esposito, editing by Chizu Nomiyama)