Mexico manufacturing goes from bad to worse, hits new low

MEXICO CITY, Jan 2 (Reuters) - Activity in Mexico’s manufacturing sector fell to a new series low in December on the back a challenging economic landscape, weak domestic demand and an unfavorable trade climate, a survey showed on Thursday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index fell to dropped to 47.1 in December from 48.0 in November, the lowest since the survey began in April 2011.

A figure above 50 signals expansion in the sector, while a reading below that threshold points to contraction.

“Manufacturing sector conditions in Mexico went from bad to worse in December, with rates of contraction in output, new orders, exports and input buying accelerating to the fastest in the near nine-year survey history,” the PMI survey said.

The sub-index that measures business sentiment also slipped to its lowest level on record, while firms further trimmed head counts, the survey showed.

The latest PMI data underscores the difficulty President Andres Manuel Lopez Obrador faces in steering Latin America’s second largest economy.

The manufacturing sector has contracted eight times since Lopez Obrador took office in December 2018, pledging to ramp up economic growth to an average of 4% per year and tackle inequality and corruption.

Mexico’s economy entered a mild recession during the first half of 2019 and was flat in the third quarter.

“So far, it’s difficult to see a light at the end of the tunnel and any meaningful rebound in 2020,” IHS Markit economist Pollyanna De Lima, who wrote the report, said. “In fact, businesses are at their least optimistic towards growth prospects in the series history, with many concerned about lingering uncertainty, a lack of investments and ongoing troubles in the automotive sector,” said De Lima.

Mexico sends about 80% of its exports, much of which are manufactured goods like cars and televisions, to the United States.

The PMI index is composed of five sub-indexes tracking changes in new orders, output, employment, suppliers’ delivery times and stocks of raw materials. (Reporting by Anthony Esposito, Editing by Chizu Nomiyama)