Mexico's March index of leading economic indicators jumped to a
one-year high of 100.4, after two straight months at 100.2.
Prior to that, the index had stood at 100.1 in December and at a
revised 99.9 in each of the last three months of 2012. The
rise in March stemmed entirely from the subindex on U.S. stock
prices. That subindex rose to 101.2, for its highest level
since 2008. Meanwhile, the March subindexes on manufacturing
employment, nonpetroleum exports, Mexican stock prices and interest
rates were all unchanged at levels ranging from 99.7 to
100.3. Reflecting the recent surge in the value of the peso,
the subindex on the inflation-adjusted exchange rate fell to a
multi-year low of 99.2. 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 rising, as it is now, it suggests the
economy is in an expansionary phase. Some sectors of the
Mexican economy are rebounding after a soft spot at the turn of the
year, so the rise in the leading index makes sense.
Nevertheless, it is important to remember that other economic
sectors remain weak, and there are several foreign and domestic
challenges that will likely prevent the economy from accelerating
too much. The key risks include the possibility of another
flare up in the European debt crisis, relatively slow growth in the
United States and other key developed countries, and the recent
strength of the peso.
Patrick Fearon, CFA
Vice President, Fund Management