Coronavirus batters Mexico’s factories in June, pace of slump eases

MEXICO CITY (Reuters) – Mexico’s manufacturing sector contracted sharply in June as lockdown measures to curb coronavirus contagion stifled output and demand, though the pace of decline eased slightly from May, a survey showed on Wednesday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index stood at 38.6 in June after 38.3 in May, still far below the 50-threshold that divides contraction below that level and expansion above. The index is gradually recovering after hitting the lowest in the survey’s nine-year history in April. “The latest PMI data for the Mexican manufacturing sector suggest the country is still struggling in its fight against the coronavirus outbreak. Production continued to decline sharply, with demand conditions subdued and many factories remaining closed,” said Eliot Kerr, economist at IHS Markit and author of the report.

The survey showed that in June new orders fell, firms cut production sharply and businesses cut staff and purchasing activity. Still, data was “trending in the right direction” as the rates of decline for activity, new orders and employment all eased and sentiment improved slightly though it remained negative overall, the survey showed.

Mexico’s economy has been hammered by the pandemic, with the International Monetary Fund (IMF) predicting the country’s gross domestic product could shrink by up to 10.5% this year, in what would be its biggest decline since the 1930s. “Going forward, demand will be the key driver in any recovery on the new orders index in the coming months. Only when demand begins to rebound will the Mexican manufacturing sector see a sustained rise in output,” said Kerr.

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)