MexECON Blog

April Leading Index Falls 0.6 Percent

Mexico's April index of leading economic indicators fell 0.6%, after seasonal adjustments.  It was the first decline in the index since February 2009.  Nevertheless, the fall in April reversed only a portion of the 1.6% increase in March, and the index remains much higher than it was one year ago.  According to the report, issued by the national statistics agency INEGI, the decline in the leading indicators in April stemmed from decreases in the subindexes on hours worked in the manufacturing sector, crude oil prices, inflation-adjusted stock prices, and construction activity.

Comment:  The fall in the April leading index is consistent with other recent signs of a slowdown in the Mexican economy.  For example, Mexican unemployment has recently been rising again, and it is almost back up to this cycle's peak.  All the same, one month's decline in the index does not necessarily portend a fall back into recession or a prolonged slump.  Mexico is still benefiting from inventory rebuilding and modest increases in corporate and consumer demand in the United States.  Exports have been rising, and that has prompted an increase in Mexican industrial activity.  Of course, there are several risks, including the possibility that the U.S. economy could stall out or that the world's financial markets will continue to be destabilized because of concerns about European debt defaults.  Nevertheless, the balance of risks is still probably to the upside in Mexico, which could support renewed strengthening in the peso and in the value of Mexican assets.

Patrick Fearon, CFA
Vice President, Fund Management

                                   Mexico's Index of Leading Economic Indicators
                                                   Seasonally Adjusted, 2003=100
                                                                   Source:  INEGI
Leading Index 1004

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