October 1, 2019 / 2:50 PM / 2 months ago

Mexican manufacturing declines for fourth third straight month

MEXICO CITY (Reuters) - Activity in Mexico’s manufacturing sector contracted for a fourth straight month in September, a survey showed on Tuesday, on the back of deteriorating economic conditions, weak client confidence and soft demand.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index MXPMIM=ECI stood at 49.1 in September, barely higher than the 49.0 in August, which was the lowest reading in the survey’s nearly 8-1/2 year history.

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

It is the sixth time the sector has contracted since President Andres Manuel Lopez Obrador took office in December 2018.

“Mexico ended the third quarter of 2019 with its worst manufacturing performance in the eight-and-a-half-year survey history, owing to a record deterioration in business conditions in August and a broadly similar performance in September,” said IHS Markit economist Pollyanna De Lima, who wrote the report.

Mexico’s economy barely escaped entering a recession in the first half of the year, after posting no growth in the second quarter and contracting in the first, underlining the economic challenge facing Lopez Obrador.

“Manufacturers cut their staffing numbers again and further reduced purchasing activity. The downturn was often attributed to challenging economic conditions, weak demand and subdued client confidence,” said De Lima.

The report highlighted that business sentiment strengthened to a four-month high, but remained subdued by historical standards. Those firms that were optimistic cited upbeat projections for sales, exports, investment, advertising and new product launches.

A sub-index measuring output slipped to 47.7 from 48.6 the previous month, dipping to its lowest level on record.

Some of the decisions made by Lopez Obrador, a leftist proponent of economic nationalism, have shaken investor confidence in Mexico, dampening hopes for growth.

Confidence in Mexico also was rattled at the end of May when President Donald Trump threatened to impose tariffs on all Mexican imports to the United States if Mexico did not curb the flow of U.S.-bound migrants. A provisional deal to avert the tariffs was reached in June.

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

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