MexECON Blog

June Leading Index Falls to 100.2

Mexico's June index of leading economic indicators fell to 100.2, after a revised reading of 100.4 in May.  Prior to that, the index had been steady at 100.5 for three straight months.  The decline in June stemmed entirely from a fourth straight monthly fall in the subindex on manufacturing employment.  That subindex fell to 99.8, reaching its lowest level since September 2009.  On a more positive note, the subindex on non-petroleum exports was unchanged at a healthy 100.7, and the subindex on U.S. stock prices was steady at a strong 101.0.  The subindexes on interest rates, the inflation-adjusted exchange rate, and Mexican stock prices all rose.  The report was released on Monday 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 downturn in the leading index is consistent with the latest worsening of the European debt crisis and slowing U.S. economic growth since the spring.  Over the last several weeks, however, the European situation appears to have stabilized somewhat, and an acceleration in U.S. payroll growth during July suggests economic activity north of the border could be improving again.  Mexican exports are growing at a good clip, and the country has significant momentum in its domestic demand.  With these latest developments, it is possible that Mexico's economy will not slow too much in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1206

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