Report: Manufacturing in Mexico (July 23, 2009)
By Jose Ruiz
Monterrey, Mexico (July 23, 2009).- Mexican manufacturers are seeing an end to steep declines in output as U.S. companies begin ramping up orders and reducing inventory.
Overall manufacturing activity is still declining but it is doing so at a slower pace. U.S. Manufacturing declined in June at its slowest pace since August of last year, a sign that the bottom is near in the U.S. and consequently in Mexico which is closely tied to U.S. activity. Mexico last year sold 80 percent of its $291 billion in exports to the U.S.
A full manufacturing recovery in Mexico will be slow and very dependant on the automobile industry which makes up 20 percent of Mexico’s industrial production. A number that is too large to be offset by other industries.
Production in that industry sank 42 percent during the first part of 2009 as General Motors and Chrysler adjusted factory production to match lower demand in the U.S.
Local recovery will depend less on internal factors and more on U.S. consumer demand where employers cut more jobs than expected in June threatening a decrease in consumer confidence and consumer spending which will be critical for an economic recovery. It is expected that the unemployment rate in the United States will hit its worst point until early next year.
Other indicators pointing towards hitting bottom is the factory index from The Institute for Supply Management which rose in June for a sixth consecutive month to 44.8, after hitting its lowest point in December (32.9). An index below 50 indicates a contraction. So the trend, while still reflecting a contraction is positive as the contraction rate slows.
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Jose Ruiz is a Principal in Heidrick & Struggles’ Monterrey office. As an executive recruiter he has worked on executive search projects for multinational clients in industrial sectors and consumer markets. He can be reached at +52 (818) 8625-6521 or jruiz@heidrick.com
About Heidrick & Struggles International, Inc.
The world’s premier provider of senior-level executive search and leadership consulting services. The firm’s executive recruiters and leadership experts operate from principal business centers in North America, Latin America, Europe and Asia Pacific. In Mexico, Heidrick & Struggles operates offices in Mexico City and Monterrey. For more information about Heidrick & Struggles please visit www.heidrick.com
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