Mexican factories contract again as supply-side issues weigh, costs rise

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MEXICO CITY – Mexico’s manufacturing sector remained little changed in November from October, shrinking for the 21st straight month as supply-side bottlenecks continued to weigh and input costs surged, a survey showed on Wednesday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index inched slightly higher to 49.4 in November from 49.3 in October, 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 10-1/2 year history.

The new reading signaled a further deterioration in the health of the manufacturing sector, though the contraction was mild compared to those seen since the onset of COVID-19, the survey said.

“The performance of Mexican manufacturers was again negatively impacted by supply chain constraints, although subdued demand conditions partly contributed to the latest contraction in output,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

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Data last week showed that Mexico’s economy contracted 0.4% in the third quarter, receding faster than previously thought as services slumped and supply chain issues bit, challenging the central bank as it juggles record inflation, a weak peso and leadership changes.

“In some instances, companies indicated having purchased fewer inputs due to elevated prices for many items, exacerbating their stock-replenishing problems arising from lengthening delivery times,” said De Lima.

According to De Lima the survey underscored that inflationary pressures remained elevated, with the latest increase in input costs the second-strongest in over three years.

Mexican annual inflation accelerated faster than expected in the first half of November to more than 7%, the highest rate in over 20 years.

(Reporting by Anthony Esposito, Editing by Chizu Nomiyama)