MexECON Blog

May Leading Index Flat at 101.1

Mexico's May index of leading economic indicators came in at 101.1, unchanged from the revised readings in April and March.  The index remains at its highest level since 2008.  According to the report, from the official statistics agency INEGI, the flat performance in May came as two subindexes rose modestly, two fell slightly, and two were unchanged.  The subindex on non-petroleum exports rose for a 24th straight month, reaching a three-year high of 101.5, while the subindex on interest rates rose to 100.0.  The subindex on manufacturing employment fell to 100.3, reaching its lowest level since late 2009, and the subindex on the inflation-adjusted exchange rate fell to 99.3.  The subindexes on Mexican and U.S. equity prices were unchanged.  The overall index is now up 0.7% 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, as they are now, the index suggests the economy may be passing from an expansionary phase to a period of deceleration.  That would not be unexpected, given that the world economy has slowed dramatically.  With no clear impetus for renewed growth in the near term, world demand for Mexican exports could weaken, and domestic demand may not be able to take up the slack.  Mexico's economy will probably keep growing in the near term, but the growth rate could slow significantly.

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 1105

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