MexECON Blog

Leading Index Finally Stabilizes

Mexico's June index of leading economic indicators was unchanged at 99.8, finally stabilizing after declines in each of the preceding eight months.  According to the report, three of the subindexes actually rose a bit in June.  Because of the continuing depreciation of the peso, which should help make Mexican producers more competitive, the subindex on the inflation-adjusted exchange rate rose to a multi-year high of 101.4.  The subindex on manufacturing employment rose to 100.7, while the subindex on interest rates edged up to 100.1.  However, those increases were offset by stable or lower readings for the June subindexes on corporate managers' willingness to invest, Mexican stock prices, and U.S. stock prices.

The report was released on Monday 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 has been recently, it suggests the economy is slowing and falling further below its potential.  Nevertheless, I am encouraged by the apparent stabilization in the index during June.  If the index remains stable or increases again in the coming months, it would confirm my suspicion that stronger consumer spending and a potential recovery in U.S. industrial demand will prevent the Mexican economy from slowing too much.

Patrick Fearon, CFA
Portfolio Manager

Leading Index 1506

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