MexECON Blog

February Leading Index Falls to 99.9

Mexico's February index of leading economic indicators fell to 99.9, after revised readings of 100.0 in each of the previous four months.  The decline in February came entirely from decreases in the subindexes on non-petroleum exports and Mexican stock prices.  Both those subindexes fell to 99.3, reaching their lowest levels in more than four years.  The subindexes on interest rates and inflation-adjusted exchange rates were unchanged at 99.7, while the subindex on U.S. stock prices was unchanged at 101.2.  On a more positive note, the February subindex on manufacturing employment rose to a 10-month high of 99.4.

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.  When the index is below 100 and falling, as it was in February, it suggests the economy may be reading toward recession.  Indeed, Mexican economic growth slowed sharply in the fourth quarter of 2013, and activity remains relatively sluggish in early 2014.  There seems to be a glimmer of hope in a February rebound in exports and a recent improvement in the consumer sector, but it is unclear whether those areas will continue to get stronger.  Some key aspects of the Mexican economy - particularly the construction sector - remain particularly weak.  In the coming months, I expect that the Mexican economy will continue to expand, but only at an uninspiring rate.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1402

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