MexECON Blog

Leading Index Keeps Rising

Mexico's October index of leading economic indicators rose to 100.4, compared with unrevised readings of 100.3 in September and 100.2 in August.  The index has now risen for six straight months, reaching its highest level since the spring of 2012.  According to the report, the rise in October stemmed entirely from increases in two of the six subindexes.  The subindex on manufacturing employment rose for a fifth straight month, reaching a 20-month high of 100.1.  The subindex on non-petroleum exports rose for a second straight month, reaching a 20-month high of 100.1.  Meanwhile, the subindex on U.S. stock prices was unchanged at 100.8, and the subindex on Mexican stock prices was unchanged at 100.0.  The subindex on the inflation-adjusted exchange rate was flat at 99.8, while the subindex on interest rates was flat at 99.6.

The report was released on 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 above 100 and rising, as it is now, it suggests the economy is expanding and gathering strength.  The new-found strength in the Mexican economy comes in large part from an acceleration in export growth, but there has also been a rebound in the long-suffering construction sector.  Just as important, hiring continues to increase gradually.  Consumer confidence is on the upswing, and consumption demand has generally been strengthening.  If consumption continues to improve in the coming months, it will help support stronger growth in the overall economy.  There are still pockets of weakness, such as limp spending on public works, and the economy could still falter if rising U.S. interest rates spark a sudden outflow of capital.  For now, however, the overall Mexican economy is clearly in an acceleration phase.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1410

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