MexECON Blog

January Leading Index Falls Further

Mexico's January index of leading economic indicators fell to 100.0, after revised readings of 100.1 in December and 100.2 in both November and October.  The reading for January was the lowest since last May.  According to the report, the decline in January reflected lower readings in three of the six subindexes.  The subindex on U.S. stock prices fell to 100.5, reaching its lowest level in a year and a half, while the subindex on Mexican stock prices declined to 99.5, for its lowest level in more than five years.  The subindex on non-petroleum exports fell to 99.6, marking its fourth straight monthly decline.  In contrast, the January subindexes on manufacturing employment, interest rates, and the inflation-adjusted exchange rate all posted modest increases.

The report was released today by INEGI, the official statistics agency.

Comment:  Mexico's leading index is designed so that readings of 100 point to the economy growing at its long-run tendency in the coming months.  When the index is declining but still above or at 100, as it has been recently, it suggests the current expansion is losing steam.  That is consistent with the recent cooling in Mexican exports.  Measured in dollars, they have declined in recent months.  However, because of the recent weakness in the value of the peso, exports as measured in pesos are still rising at a good pace.  In my view, the continued economic expansion north of the border and the low value of the peso will tend to support a rebound in Mexican exports going forward, while private investment and consumer spending will probably continue to trend upward.  Low oil prices and the possibility of higher interest rates in the United States will probably keep some economic players cautious, but I suspect the Mexican economy can continue to grow moderately in the near term.

Patrick Fearon, CFA
Vice President, Fund Management

Leading Index 1501

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