MexECON Blog

March Leading Index Rises to 101.3

Mexico's March index of leading economic indicators rose to 101.3, after  revised readings of 101.2 in February and 101.0 in January.  The index has now risen for six straight months, and it currently stands at its highest level in more than three years.  According to the report, from the official statistics agency INEGI, the rise in March reflected improvements in the subindexes on non-petroleum exports and U.S. equity prices.  The subindexes on manufacturing employment, Mexican equity prices, interest rates, and the inflation-adjusted exchange rate were all unchanged at relatively high levels.  The overall index is now up 0.8% 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.  When readings are above 100 and accelerating, as they have been recently, the index suggests the economy is in a solid expansionary phase.  The continued good performance of the index is a welcome antidote to some of the recent softer reports out of Mexico and outright negative reports from some of the key developed countries.  Despite the relatively good reading in the index, however, there are reasons for caution.  Global inventory rebuilding after the "Great Recession" of 2008 and 2009 appears to have been largely completed.  At the same time, high debt levels are forcing many governments to cut spending, while rising commodity prices have prompted key central banks to start raising interest rates.  Finally, high unemployment and worrisome debt levels have constrained consumer spending in many developed countries, even as excess housing supplies and weak financial systems have prevented investment from giving a boost to the economic rebound.  Even though Mexico's leading index is still pointing to expansion, there is some risk that near-term economic growth could slow more than anticipated.

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 1103

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