MexECON Blog

July Leading Index Flat at 100.3

Mexico's July index of leading economic indicators came in at 100.3, unchanged from the revised June reading but lower than the readings of 100.4 in each of the two months before that.  The most recent peak in the index came in March, when it stood at 100.5.  According to the report, the subindex on U.S. stock prices rose to a four-year high of 101.0 in July, while the subindex on non-petroleum exports was unchanged at 100.7.  The subindex on interest rates rose to 100.4.  The subindex on Mexican stock prices was stable at 100.0, and the subindex on the inflation-adjusted exchange rate was flat at 99.9.  In contrast, the subindex on manufacturing employment declined to 99.6, its lowest level since September 2009.  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 above 100 and falling gradually, as it has been since spring, it points to modestly slowing growth.  Without a doubt, the slow decline in the index reflects the latest worsening of the European debt crisis.   U.S. economic growth also was weakening in mid-summer, so it probably had some impact on the July index as well.  Yesterday's report of a continuing decline in consumer confidence during August is further evidence that the international environment is raising risks for Mexico.  Nevertheless, it is important to emphasize that the decline in the leading index has only been modest.  It also appears that the U.S. economy has now stabilized.  That implies that Mexico's economy might not slow too much going forward.  

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1207

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