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IMEF Manufacturing Indicator decreased 0.6 points in August

The IMEF Manufacturing Indicator decreased 0.6 points in August to close at 51.3 units, placing it in the expansion zone for the sixth month.

The IMEF Indicator is a diffusion index that assesses the economic environment based on a survey of five qualitative questions.

In particular, the IMEF Indicator is constructed to help anticipate the direction of manufacturing and non-manufacturing activity in Mexico and, based on the expected evolution of these sectors, infer the possible evolution of the economy in general in the short term.

IMEF Manufacturing Indicator

To understand: the IMEF Indicator varies in an interval from 0 to 100 points and the level of 50 points represents the threshold between an expansion (greater than 50) and a contraction (less than 50), of economic activity.

The IMEF Manufacturing Indicator decreased 0.6 points in August to close at 51.3 units, placing it in the expansion zone (> 50) for the sixth month.

Its trend-cycle series decreased 0.2 points to settle at 51.4 units and register seven consecutive months in the expansion zone.

For its part, the Indicator adjusted for company size decreased 1.5 points to close at 51.6 units, remaining in the expansion zone for the fourteenth consecutive month.

Meanwhile, the IMEF Non-Manufacturing Indicator registered a 2.2 point drop in August to close at 50.1, remaining in the expansion zone for six consecutive months.

Context

When analyzing the performance of the SCIAN subsectors during June, it is observed that of the monthly data available only 35.3% of them presented a positive growth rate, in contrast to an average fraction equivalent to 64.6% during the first five months of 2021.

For the Institute, this situation may be mainly due to two fronts where the shocks related to the pandemic are complicating the road to economic recovery.

First, industrial activities face two major complications in their key components: manufacturing and construction.

The lack of dynamism in domestic manufacturing can be partly explained by the worsening of the global supply chain crisis. Logistics problems and a shortage of raw materials have affected not only our country, but other key trading partners such as the United States.

This has slowed the growth rate of external demand for domestic manufactured products.

While such a slowdown has not reversed the upward trend in exports – due to the strong boost in the value of oil exports – they are not driving up economic growth either.

Another point against is the continuous recovery of imports, although the flow of imports of imported goods could favor production in later periods, as suggested by the IMEF manufacturing indicator and in particular its component of new orders. On the other hand, the construction industry is also recovering at a much slower rate, a reflection of structural challenges that, since before the pandemic, had been limiting its growth.

To mention one of them, the lower rate of Gross Fixed Investment stands out, which since before the pandemic remained stagnant due to the great uncertainty caused by the renegotiation of NAFTA and the restructuring of government spending that limited public participation in the sector.

Pandemic

Second, trade and services activities exhibited contractions in several of their sectors that are equivalent to 41% of GDP.

In some cases, such as retail business, this weakness has been felt since May.

This could be explained by a reduction in the expectations of entrepreneurs, as suggested by the IMEF indicator of the non-manufacturing sector, as well as the worsening of the pandemic that limits the space to carry out activities in the face of a third wave of contagion that has broken records.

This last point could also be supported by the trend of timely mobility indicators provided by Google and Apple, where a brake is observed in the volume of people who move out of their residences, mainly in those who in recent months were already returning. to their usual places of work and used public transport again.

 

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