The Week Ahead: Assessing The State Of Manufacturing Activity
This week saw the release of retail sales growth and economic activity data for Mexico, as well as a decision by its central bank to cut its overnight rate by 25 basis points (bps) to 3.50% on October 25. Although both retail sales and economic activity disappointed for the month of August, coming in below survey estimates - in the case of retail sales the actual figure was -2.2% y-o-y versus estimates for 1.2% growth - we believe that the latest rate cut marks the end of Mexico's monetary easing cycle. We see manufacturing activity recovering towards the end of 2013, which will gradually see the central bank's focus shift towards price stability.
Indeed, in the week ahead we are seeing the release of several manufacturing activity indices across the region, and in the case of Mexico will be watching the release of the IMEF Manufacturing Index survey for October, which could start to show some initial signs of expansion, following below-50 prints in preceding months (a value below 50 indicates a contraction). Brazil is also due to release manufacturing data, in the form of its manufacturing PMI for October, as well as industrial production data for September. Manufacturing index data will also come out for Chile, which has seen a 2.0% y-o-y contraction in August. Survey estimates currently place the September print at 2.1%.
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