MexECON Blog

Leading Index Continues to Fall

Mexico's April index of leading economic indicators declined to 99.8, after unrevised readings of 99.9 in March and 100.0 in February.  The index has now fallen for seven straight months, and it stands at its lowest level since November 2009.  According to the report, the decline in April reflected weaker readings in just two of the six subindexes.  The subindex on corporate managers' willingness to invest fell for a seventh straight month, reaching 99.0, and the subindex on U.S. stock prices inched downward to 100.3.  In contrast, the subindex on Mexican stock prices was flat at 99.8.  The subindex on interest rates rose to a 13-month high of 100.0, while the subindex on manufacturing employment rose to a 27-month high of 100.4.  The subindex on the inflation-adjusted exchange rate jumped to 101.2, its highest level since August 2009.

The report was released earlier this month 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 below 100 and falling, as it is now, it suggests the economy is slowing and falling farther below potential.  The main reason for the fall appears to be the lull in the U.S. economy over the winter, which weighed on Mexican exports and confidence in spite of the low peso.  Another problem has been the Mexican government's effort to deal with lower oil revenues by cutting its budget, even as the recovery in Mexico's housing market started to lose steam.  Fortunately, the most recent data suggest that the U.S. economy is accelerating again, which may limit how much the Mexican economy slows going forward.

Patrick Fearon, CFA
Portfolio Manager

Leading Index 1504

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