MexECON Blog

July Leading Index Falls to 100.9

Mexico's preliminary July index of leading economic indicators fell to 100.9, after readings of 101.0 in June and 101.1 in each of the three months prior to that.  According to the report, from the official statistics agency INEGI, the fall in July reflected declines in four of the six subindexes.  The subindex on manufacturing employment dropped to 100.3, reaching its lowest level since October 2009, while the subindex on the inflation-adjusted exchange rate fell to 99.3, reaching its lowest level in almost nine years.  The subindex on Mexican equity prices fell to a one-year low of 99.8, while the subindex on U.S. equity prices fell to 101.0, for its worst reading since last December.  In contrast, the subindexes on non-petroleum exports and interest rates posted small increases.  The overall index is now up 0.6% 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.  Beginning this month, INEGI is publishing a preliminary figure based on data from the last four to six weeks, which should provide a more real-time indicator of what the economy is doing.  The decline in the preliminary index for July is consistent with the sharp slowdown in global economic activity that became evident during the summer.  Mexico's economy is still likely to keep growing in the near term, but the growth rate could slow significantly, and the balance of risks is 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 1107

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