MexECON Blog

November Leading Index Falls to 99.9

Mexico's November index of leading economic indicators fell to 99.9, down from a revised 100.0 in each of the prior two months.  It was the first time the index dipped below 100.0 since January 2010.  The decline in November came as the subindex on manufacturing employment fell to 99.0, for its ninth straight monthly decrease.  The subindex on the inflation-adjusted exchange rate fell to 99.6, for its third straight decline.  However, the subindex on non-petroleum exports was unchanged at 100.0, and the subindex on U.S. stock prices was flat at 100.9.  On a more positive note, the November subindex on Mexican stock prices rose slightly to 100.1, while the subindex on interest rates edged up to 100.5.  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.  The recent weakness in the index is consistent with several other reports out of Mexico.  For example, exports have been softening since last summer, industrial production and fixed investment have flattened out or started to decline slightly, and unemployment has edged up.  However, I continue to believe it is too early to say that Mexico's economy is in serious trouble.  Some key sectors are showing robust strength, with the purchasing managers' index for the manufacturing sector holding at a record high in December, and consumer confidence on the upswing.  The most likely scenario going forward is for Mexican economic growth to simply slow down to an average or below-average rate in the coming months.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1211

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