Mexico's factories contract for 25th straight month, inflation rises

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MEXICO CITY, April 1 (Reuters) - Mexico's manufacturing sector contracted for the 25th month in a row in March, amid rising inflation, global shortages of materials, and economic uncertainty due to the pandemic and the war in Ukraine, a survey showed on Friday.

The seasonally adjusted S&P Global Mexico Manufacturing Purchasing Managers' Index (MXPMIM=ECI) rose to 49.2 in March, from 48.0 in February, below the 50 threshold that separates growth from contraction.

The upward movement in the PMI reflected slower reductions in new orders, stocks of purchases and employment, as well as a sharper deterioration in supplier performance, the survey said.

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The index has remained below the 50-mark since March 2020, and plummeted to 35.0 in April 2020 during the initial lockdown phase of the coronavirus pandemic, in what was by far the lowest reading in the survey's 11 year history.

"With Mexico's manufacturing industry stuck in contraction and inflationary pressures mounting, the latest results ring alarm bells for policymakers," said Pollyanna De Lima, economics associate director at S&P Global.

Companies polled in the survey reported a fall in production volumes and input costs rose sharply.

"PMI data showed the second-sharpest increase in input costs in the 11-year survey history, which companies often linked to raw material scarcity, the pandemic and Russia's war against Ukraine," said De Lima.

Those surveyed remained optimistic about future output, even as overall confidence was dampened by inflation concerns, raw material scarcity and the war.

The combination of ongoing interest rate hikes and acute price pressures is likely to curtail business investment and consumption, making it more difficult for the economy to recover, De Lima said.

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Reporting by Valentine Hilaire

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