MexECON Blog

July Leading Indicators Rise 0.2 Percent

Mexico's July index of leading economic indicators rose a seasonally-adjusted 0.2%, according to a report today from the official statistics agency INEGI.  The rise in July snapped a three-month string of declines, including decreases of 0.4% in June, 0.3% in May, and 0.6% in April.  According to today's report, the rebound in July stemmed from improvements in the subindexes on hours worked in the manufacturing sector, real stock prices, construction activity, and average export prices for Mexican crude oil.  In contrast, the inflation-adjusted exchange rate was a negative contributor to the index in July, while interbank interest rates were virtually unchanged.

Comment:  The rebound in Mexico's leading index during July was not particularly strong, but coupled with other recent data, such as yesterday's report of a second straight month of rising consumer confidence, the report helps confirm that the country's economic rebound is not ready to end just yet.  The three straight declines in the leading index from April through June apparently signaled a mere slowdown in growth, not an outright decline in activity.  Nevertheless, the Mexican economic rebound remains uncomfortably dependent on rising exports to the United States.  While Mexico's consumer sector is growing again, it is not growing fast enough to provide a second major support for the recovery, and investment is still stuck in the doldrums.  With U.S. inventory rebuilding continuing to slow and U.S. corporate and consumer demand not accelerating significantly, Mexico's leading indicators are likely to be choppy in the coming months, and the Mexican economic rebound is vulnerable to a slowdown.

Patrick Fearon, CFA
Vice President, Fund Management

                              Mexico's Index of Leading Economic Indicators
                                            Seasonally Adjusted, 2003 = 100
                                                            Source:  INEGI
Leading Index 1007

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