(Reuters) – Mexico’s factories faced deteriorating business conditions for a fifth straight month in July, though the rate of decline eased to the softest since before the coronavirus began to severely hamper the Mexican economy, a survey showed on Monday.
The IHS Markit Mexico Manufacturing Purchasing Managers’ Index <MXPMIM=ECI> stood at 40.4 in July from 38.6 in June, but still far below the 50-threshold that marks the boundary between contraction and expansion.
After hitting the lowest point in the survey’s nine-year history in April, the index has been gradually recovering.
“The latest PMI data suggested that the Mexican manufacturing sector is continuing to struggle amid the COVID-19 outbreak. Although rates of decline in output and new orders eased further from April’s records, the overall contractions remained sharp,” said IHS Markit economist Eliot Kerr.
July PMI data comes after Mexico’s economy, Latin America’s second largest, shrunk by a historic 17.3% in the second quarter as the pandemic forced factories to shut, kept shoppers and tourists at home and upended trade.
Many businesses remain closed, demand is still depressed and job losses are adding up, weighing on new business and creating a downward spiral, said Kerr.
From March to June Mexico has lost over 1.1 million tax-paying jobs and several million more in the informal sector.
Mexico’s economy is likely to contract by 10.5% this year, according to the International Monetary Fund, in what the finance ministry and central bank have said would be the worst recession since the 1930s Great Depression.
But there are some signs of hope, as sentiment towards future activity prospects is slowly improving, although it remains negative overall.
“This suggests that an increasing number of panelists are becoming confident that the worst of the crisis will soon be over, and then we may start to see a reversal of the job cuts and activity declines recorded since the start of the pandemic,” 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 Chris Reese)