MexECON Blog

October Leading Index Falls to 99.8

Mexico's October index of leading economic indicators fell to 99.8, after a revised reading of 99.9 in September and an unrevised reading of 100.1 in August.  The index has now fallen for six straight months, and it stands at its lowest level since December 2009.  According to the report, the decline in October reflected decreases in three of the six subindexes.  The subindex on manufacturing employment fell to 98.8, for its eighth straight decline.  The subindex on non-petroleum exports dipped to 99.8, and the subindex on the inflation-adjusted exchange rate edged down to 99.6.  In contrast, the subindexes on Mexican and U.S. stock prices were unchanged, and the subindex on interest rates rose slightly.  The report was released today by INEGI, the official statistics agency.

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 the index is falling and below 100, as it is now, it points to an impending recession.  Nevertheless, it is still too early to sound the alarm.  The index has only fallen slightly below 100, and only for two months at that.  It could well rebound again, just as it did after a similar dip in late 2011.  That prospect is especially possible because other recent data imply continued strong momentum in the Mexican economy.  For example, this week's manufacturing index for November came in at a record high, and unemployment continues to trend downward.  The key message in today's report may simply be that after three years of extraordinary growth, the Mexican economic rebound is maturing.  While some sectors continue to show unusual strength, the overall picture is cooling against a backdrop of slowing demand overseas.

Patrick Fearon, CFA
Vice President, Fund Managment

Leading Index 1210

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