MexECON Blog

Leading Index Unchanged in November

Mexico's November index of leading economic indicators came in at 100.4, unchanged from October but still higher than the 100.3 in September and the 100.2 in August.  According to the report, the only subindex to post an increase in November was the one on manufacturing employment.  That subindex rose for a sixth straight month, reaching a 27-month high of 100.5.  In contrast, the subindexes on non-petroleum exports, the inflation-adjusted exchange rate, and interest rates were all unchanged at readings ranging from 99.6 to 99.9.  The subindex on U.S. stock prices was unchanged at 100.7.  The only subindex to post a decline in November was the one on Mexican stock prices.  It fell slightly to 99.8, versus 99.9 in October.

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 has been recently, it suggests the economy is expanding and gathering strength.  It may be too much to say that the Mexican economy is firing on all cylinders, but it does seem to be firing on most.  With the U.S. economy accelerating, Mexican exports are rising at a good pace, and the recent weakness in the peso suggests sales abroad could well strengthen further in the near future.  Manufacturing output is rising in tandem, as is corporate investment, and residential construction is in a strong rebound.  The resulting rise in hiring has cut the unemployment rate sharply over the last six months, as shown in yesterday's report on the labor market.  Consumer sentiment and spending are therefore on the upswing.  Nevertheless, there are still some headwinds, such as limp spending on public works, the possibility that falling oil prices will eventually crimp the government's budget, and the risk that rising interest rates in the United States will spark an outflow of capital.  For now, however, the Mexican economy is clearly in an acceleration phase.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1411

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