MexECON Blog

December Leading Index Softens

Mexico's December index of leading economic indicators fell to 100.2, after revisions showed the index at 100.3 in each month from September to November.  According to the report, the decline in December came entirely from the subindex on Mexican stock prices.  That index fell for the third straight month, reaching a seven-month low of 99.7.  In contrast, the subindex on U.S. stock prices was steady at 100.7, and the subindex on non-petroleum exports was unchanged at 99.9.  Meanwhile, the December subindexes on interest rates, the inflation-adjusted exchange rate, and manufacturing employment all rose slightly.

The report was released today 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 stable or falling, as it has been recently, it suggests the economy is expanding.  The current expansion reflects continued growth in Mexican exports, which are being helped by expanding demand in the United States and the recent decline in the value of the peso.  In addition, investment in machinery, equipment, commercial facilities, and new homes are all on the upswing, and falling unemployment holds out the promise of stronger consumer spending.  The dramatic decline in the peso partly reflects investor concern about capital eventually drying up when U.S. interest rates start rising.  The weak currency also reflects concern about the potential for low oil prices to cause fiscal problems down the road.  For now, however, the Mexican economy looks set to keep growing at a moderate pace.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1412

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