MexECON Blog

June Leading Index at Two-Year High

Mexico's June index of leading economic indicators rose to 100.2, compared with 100.1 in May and 100.0 in April.  The index has now risen for four straight months, reaching its highest level in two years.  The increase in June reflected improvement in three of the six subindexes.  The subindex on U.S. stock prices edged up to a six-year high of 101.1, while the subindex on Mexican stock prices rose to 99.7.  The subindex on manufacturing employment rose for a fourth straight month, reaching 99.8.  In contrast, the subindex on the inflation-adjusted exchange rate was unchanged at 99.8, and the subindex on non-petroleum exports was flat at 99.7.  The subindex on interest rates fell slightly to 99.6.

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.  When the index is above 100 and rising, as it is now, it suggests the economy is expanding and gathering strength.  Most of the improvement can be traced to a recent reacceleration in exports.  With U.S. demand showing signs of further strengthening, I suspect exports will continue to boost the economy.  Nevertheless, several aspects of domestic demand remain on the soft side.  Residential construction and public works spending are particularly weak.  Consumers have been adjusting to the sales tax increases that took effect in January, but sentiment and spending are still being weighed down by a soft labor market and rising prices.  In the near term, therefore, year-over-year growth in gross domestic product (GDP) seems unlikely to accelerate much beyond Mexico's long-term average of 2.5%. 

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1406

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