MexECON Blog

February Leading Index Rises to 101.3

In a report on Wednesday, Mexico's February index of leading economic indicators rose to 101.3, up from revised readings of 101.2 in January and 101.0 in December.  It was the sixth straight monthly rise in the index, leaving the index at its highest level in three years.  According to the report, from the official statistics agency INEGI, the increase in February came entirely from the subindexes on non-petroleum exports, interest rates, and U.S. equity prices.  There was no change in the subindexes on manufacturing employment and Mexican equity prices, and there was a small decline in the subindex on the inflation-adjusted exchange rate.  The overall index is now up 1.0% 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.  At the current reading of 101.3, the index is pointing to above-average economic growth in the coming months.  The continued strength in the index is especially welcome after this week's report of a big drop in Mexican consumer confidence during April.  The rise in the index provides further evidence that the drop in optimism probably came mostly from extraneous, one-off events such as the recent surge in food and energy prices and the earthquake in Japan.  In the coming months, the Mexican economy looks likely to keep powering ahead on the strength of both rising exports and improving domestic demand.  Over the longer term, however, the current rate of growth is unlikely to be sustained without major economic reforms, such as breaking up monopolies, deregulating the labor market, opening up more industrial sectors to private investment, and otherwise increasing competition.

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 1102

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