MexECON Blog

December Leading Index Rises to 100.2

Mexico's December index of leading economic indicators rose to 100.2, compared with a revised 100.1 in November and 100.0 in each of the three months before that.  The reading in December was the highest since last June.  The increase in the last month of 2012 reflected modest improvements in three of the six subindexes.  The subindex on U.S. stock prices rose to 101.0, for its best reading in four and a half years.  The subindex on Mexican interest rates rose to 100.5, and the subindex on Mexican manufacturing employment increased to 99.5.  Meanwhile, the subindexes on Mexican stock prices and non-petroleum exports were both unchanged at 100.1.  In the only negative aspect of the report, the subindex on the inflation-adjusted exchange rate fell for a sixth straight month, coming in at 99.4.  The report was released Friday 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 rising and above 100, as it is now, it suggests the economy is in an expansionary phase.  The reading for December was good, but it was just as encouraging that the reading for November was revised upward from the sub-100 figure announced last month.  The original November reading had suggested the economy could be headed toward a contraction, consistent with reports showing softness in the construction and mining sectors and an uptick in overall unemployment in late 2012.  More recently, however, it has become clear that Mexican exports were rebounding as 2012 drew to a close, lifting the key manufacturing sector.  Consumer confidence and consumption spending also continue to rise.  On balance, it looks like the Mexican economy is set to continue growing well in the coming months, subject to the risk that U.S. fiscal policy could tighten too quickly or the European debt crisis could flare up again.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1212

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