MexECON Blog

January Leading Index Rises to 100.2

Mexico's index of leading economic indicators rose to 100.2 in January, after three straight months at a revised 100.1.  The index is now at its highest level since September.  According to the report, from the official statistics agency INEGI, the improvement in January came as the subindex on interest rates rose to a 33-month high of 100.3, and the subindex on U.S. equity prices rose to a 7-month high of 100.8.  The subindexes on manufacturing employment, Mexican equity prices, and inflation-adjusted exchange rates were all unchanged.  The only subindex to decline in January was the one on non-petroleum exports, which fell marginally to 100.5.  The overall index is now down 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 in the coming months.  When the index is above 100 and rising, it points to stronger growth.  The rise in the index during January suggests the Mexican economy is pulling out of the soft spot it hit in late 2011.  Nevertheless, there are still reasons for caution.  For example, recent reports suggest softer manufacturing activity and consumer confidence in February.  The main risk for the Mexican economy is the possibility that the European debt crisis could worsen again, which would likely dry up international capital flows and hurt confidence worldwide.  In addition, rising consumer prices in Mexico have the potential to undermine consumption spending.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1201

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