‘Not a great year’ for Mexico’s factories, sector contracts for 22nd straight month

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An employee works at an LED TV assembly line at a factory that exports to the U.S. in Ciudad Juarez

MEXICO CITY – Mexico’s manufacturing sector contracted for the 22nd month in a row in December, as prices surged and supply-side bottlenecks prompted severe delays in delivery times, a survey showed on Monday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index was flat in December at 49.4, unchanged from November, but still 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.

“2021 was not a great year for Mexican manufacturers, and December was no different. The latest set of PMI data showed further contractions in output, new orders and exports, with respective sequences of reduction extended to 22 months,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Goods producers again indicated that limited container availability, transportation problems and global shortages of raw materials caused severe delays in average lead times, while supply chain issues pushed input costs higher in December, the survey said.

The overall rate of purchasing price inflation was the third-fastest on record.

Inflation in Mexico reached 7.45% in early December after averaging 7.37% in November, which was the highest rate in Mexico since early 2001, according to National statistics agency INEGI.

De Lima said that firms also continued to see their order books shrink as demand was dampened by a combination of market uncertainty, rising prices, reduced client requirements and an inability to distribute goods in a timely manner due to lingering problems sourcing raw materials.

“Worryingly, companies don’t expect supply-side problems and price pressures to dissipate in 2022. Business sentiment towards the year-ahead outlook for production fell to an eight-month low as said concerns mounted,” said De Lima.

(Reporting by Anthony Esposito, Editing by Chizu Nomiyama)