MexECON Blog

September Leading Index Falls to 100.2

Mexico's September index of leading economic indicators fell to 100.2, after downwardly revised readings of 100.5 in August and 100.7 in July.  The index has now fallen every month since the beginning of summer.  According to the report, from the official statistics agency INEGI, the decline in September reflected lower readings in four of the six subindexes.  The biggest decline came in the subindex on Mexican equity prices, which fell for the sixth time in the last seven months and came in at just 99.4.  Likewise, the subindex on U.S. equity prices fell for a fifth straight month, coming in at 100.6.  The subindexes on manufacturing employment and non-petroleum exports fell more modestly, while the subindexes on interest rates and inflation-adjusted exchange rates rose.  The overall index is now down 0.2% 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.  With the index hugging 100 as it is now, it suggests the Mexican economy will probably grow in the near term at a rate of only about 2.5%.  If the index continues to weaken and falls below 100 in the coming months, it would suggest the economy is falling into recession.  Other recent reports show Mexico's domestic economy has some momentum, but a recession would be consistent with slowing export growth and the sharp deterioration in key developed economies such as the United States.  For the Mexican economy, the balance of risks remains 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 1109

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