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
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
Patrick Fearon, CFA