MexECON Blog

Leading Index Continues to Rise

Mexico's December index of leading economic indicators rose to 100.2, after revised readings of 100.1 in November and 100.0 in October.  The index now stands at its highest level since mid-2012.  Nevertheless, the rise in the index during December was narrowly based, reflecting increases in just two of the six subindexes.  The subindex on U.S. stock prices edged up to 101.3, compared with 101.2 in November, while the subindex on manufacturing employment rose to a nine-month high of 99.6 from 99.3.  The subindexes on Mexican stock prices and the inflation-adjusted exchange rate were both steady at 99.6.  The December subindex on interest rates fell slightly to 99.7, while the subindex on non-petroleum exports fell to 99.6.

The report was released Thursday 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 was in December, it suggests the economy is in an expansion phase.  The rise in the leading index is consistent with recent data pointing to an improved trade balance.  Recent data on Mexican manufacturing has been somewhat mixed, but at the very least, the figures suggest factory activity is not falling significantly.  The fly in the ointment is that domestic demand in Mexico remains weak.  Two key problems are tight government spending and a frozen construction sector.  Weak hiring, accelerating inflation, and new sales taxes that took effect on January 1 are also weighing heavily on consumer spending.  These domestic challenges suggest to me that even if the economy keeps growing in the coming months, the growth rate is unlikely to be particularly strong.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1312

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