MexECON Blog

May Leading Index Falls to 100.3

Mexico's May index of leading economic indicators fell to 100.3, after revised readings of 100.5 in each of the previous three months.  That marked the first decline in the index since last summer.  The decrease came mostly from a fourth straight monthly fall in the subindex on manufacturing employment.  That subindex dipped to 99.9 in May, reaching its lowest level since late 2009.  The subindexes on Mexican stock prices, U.S. stock prices, interest rates, and the inflation-adjusted exchange rate were all unchanged at close to the 100 level.  In contrast, the subindex on non-petroleum exports rose for a sixth straight month, reaching 101.0.  The report was released on Thursday 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 above 100 but falling, as it is now, it points to slowing growth.  The softening in the leading index is consistent with the worsening of the European debt crisis and the slowdown in U.S. economic growth over the last few months.  If those trends continue, Mexico's economic prospects are bound to worsen.  For now, however, Mexico's reaccelerating export growth and good momentum in domestic demand should keep the economy growing.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1205

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