MexECON Blog

April Leading Index Rises to 100.2

Mexico's April index of leading economic indicators rose to 100.2, after revised figures showed the index was stagnant at 100.1 in each of the previous four months.  Prior to that, the index had been stuck at 100.0 for two straight months.

The rise in the leading index during April stemmed entirely from an increase in the subindex on U.S. stock prices.  That subindex rose for a sixth straight month, reaching a level of 101.3.  In contrast, the subindex on Mexican factory employment dropped to 98.9, reaching its lowest level since summer 2009.  The subindex on the inflation-adjusted exchange rate also fell to 98.9, for its lowest level in more than ten years.  The subindexes on nonpetroleum exports, interest rates, and Mexican stock prices also declined, but only slightly.

The report was released on Wednesday 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 generally suggests the economy is in an expansionary phase.  However, without the recent strong increases in U.S. stock prices, the leading index actually would have been flat or down in each month since at least December.  Without the distraction of strong U.S. stock prices, problems such as the weakness in Mexican manufacturing employment and the rise in the peso would be flashing very noticeable yellow flags.  It is true that recent reports suggest the Mexican economy is in a tentative rebound from its hiccup at the turn of the year.  For example, exports have reversed their big plunge in January, and the Mexican purchasing managers index shows factory employment has firmed a bit from its nadir in April.  The on-going correction in the peso also bodes well for exports, industrial activity, and hiring.  Nevertheless, Mexico now faces more economic challenges than it has faced in several years, and those challenges are reflected in the weak details in the leading index report.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1304

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