MexECON Blog

April Leading Index Steady at 99.9

Mexico's April index of leading economic indicators came in at 99.9, unchanged from the revised level in each of the previous four months.  Prior to that, the index had stood at 100.0 in October and November.  According to the report, the April subindex on manufacturing employment rose modestly for a second straight month, reaching an 11-month high of 99.4.  The April subindex on non-petroleum exports edged up to 99.6, after four straight months at 99.5.  However, all of the other subindexes were unchanged.  The April subindex on U.S. stock prices was steady at 101.1, and the subindexes on interest rates and the inflation-adjusted exchange rate were both unchanged at 99.8.  The subindex on Mexican stock prices was flat at 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 flat, as it has been for the last five months, it suggests the economy is stuck in a period of stable but tepid growth.  That rings true to me.  On the one hand, Mexican exports have posted a bit of a rebound recently, and they could continue to strengthen if the U.S. economy accelerates as many observers expect.  On the other hand, the improvement in exports is being largely offset by continued challenges in domestic demand.  The most significant problems are that residential construction remains in a deep freeze, and consumer spending is being constrained by weak hiring and recent tax hikes.  The latest reports suggest these domestic sectors may be stabilizing, but a robust recovery seems far off.  The outlook is so limited that Banco de México unexpectedly slashed interest rates on Friday to boost activity.  That rate cut will probably help ensure that the Mexican economy continues to expand in the coming months, but as the leading index suggests, the growth rate is likely to be uninspiring.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1404

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