The Day at a Glance | August 2 2023

*The U.S. Manufacturing PMI rebounded in June, although it remained in contractionary territory for a ninth consecutive month. 

*In Mexico, the Manufacturing PMI significantly exceeded the consensus estimate, reaching its highest reading in over seven years. 

*Remittances sent from Mexicans abroad reached a total of $5.571.5 billion in June, the second-highest monthly amount. 

*The private sector´s payroll increased by 324,000 positions in July, surpassing analysts’ estimate of 190,000 positions, although it moderated from the 455,000 reported in the previous month. 

*In July, 110,843 light vehicles were sold in the Mexican domestic market. With this, the accumulated figure so far in 2023 reached 743,930 units. 

*INEGI published its cyclical indicators system: the coincident indicator stood at 101 points (+0.06) above its long-term trend in May. On the other hand, the leading indicator for June increased by 0.13 points and surpassed its long-term trend with a 100.3 point figure.

*Mortgage applications decreased by -3.0% w/w during the week ending on July 28th, according to data from the U.S. Mortgage Bankers Association. 

*The Dallas Federal Reserve’s services index showed relative improvement in July, and logged its highest reading since May 2022 at -4.2 points, up from June´s -8.2. 

*Construction spending in the U.S. increased by 0.5% m/m in June, slightly below the estimated 0.6%, partly due to the upward revision in May, which set at 1.1% m/m. With this, the annual reading set at 3.5%.

Economic environment

The manufacturing ISM rebounded in July after a three-year low was recorded in the previous month. However, the 46.4 point reading fell short of the forecasted 46.8 and marked the ninth consecutive month of figures landing in contraction territory, which is primarily explained by weak demand. In this regard, new orders experienced a milder contraction with a reading of 47.3 points, up from the 45.6 points recorded in June. Similarly, other categories such as production, inventories, and order backlogs showed relative improvements by logging smaller contractions. However, the employment category fell at a faster pace (44.4 vs. 48.1), which, although not positive for the industry, could indicate reduced pressures in the tight labor market.

Mexico’s Manufacturing PMI reached its highest reading since May 2016 (53.2 points in July). Similarly, the manufacturing sector index marked its sixth consecutive month in expansionary territory. All five components set in expansionary territory, with new orders standing out by reaching their highest level since February 2019 due to robust demand and reduced price pressures. Additionally, the export sector logged recovery as international shipments reported a positive reading for the first time in five months, while production grew at its fastest pace since early 2019. On the cost front, inflation decreased to levels close to its long-term averages. Lastly, the outlook for future prospects improved, and were primarily boosted by expectations revolving around nearshoring.

Remittances set at a total of $5.571 billion dollars in June. This is the second-highest historical figure, only behind what was recorded in May of this year. With this, on an annual basis, there was a -2.1% decrease, caused by a -5.8% m/m decline in the number of transactions, which was partially offset by a 3.9% m/m increase in the average remittance to $406.4, its highest level since June of last year. On an annual basis, remittances continued to grow 8.31% due to an 8.46% y/y increase in the number of transactions, and a marginal decrease (-0.14% y/y) in the average amount per transaction. Lastly, the monthly flow in pesos amounted to 96.06 billion, with an average amount of $7,006 pesos per transaction, implying annual variations of -6.74% and -14.02% due to the peso´s appreciation against the dollar.