MexECON Blog

August Leading Index Falls to 100.6

In a report Wednesday, Mexico's August index of leading economic indicators fell to 100.6, after revised readings of 100.8 in July, 100.9 in June, and 101.0 in May.  According to the report, from the official statistics agency INEGI, the fall in August stemmed from declines in four of the six subindexes.  The biggest decline came in the subindex on U.S. equity prices, which fell to 100.8 from 101.1 previously.  There were also small declines in the subindexes on manufacturing employment, non-petroleum exports, and Mexican equity prices.  The subindex on interest rates was steady, while the subindex on inflation-adjusted exchange rates rose slightly.  The overall index is now up 0.3% from the same month one year earlier.

Comment:  Mexico's leading index is designed so that readings of 100 are consistent with the economy growing at its long-run tendency in the coming months.  When readings are above 100 but flat or declining, as they are now, the index suggests the economy is passing from an expansionary phase to a period of deceleration.  The recent declines in the index are consistent with the sharp slowdown in global economic growth over the last several months.  If the major developed economies continue to struggle, Mexico is likely to begin suffering softer exports, weaker industrial activity, slower hiring, and falling domestic demand.  The Mexican economy could still continue growing for a while yet, but the growth rate will probably slow significantly at some point, and the balance of risks is skewed to the downside.

Patrick Fearon, CFA
Vice President, Fund Management

                                             Mexico's Index of Leading Economic Indicators
                                                 Based on Seasonally-Adjusted Subindexes
                                                                Long-Run Tendency = 100
                                                                          Source:  INEGI
Leading Index 1108

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