Global Leading Indicators

The Conference Board Leading Economic Index^®(LEI) for Mexico increased by 0.3 percent in January 2023 to 111.2 (2016=100), following a 0.5 percent decrease in December 2022. Moreover, the LEI contracted only by 0.4 percent in the six-month period from July 2022 to January 2023, following a decrease of 2.2 percent over the six-month period from January 2022 to July 2022.

The Conference Board Coincident Economic Index^® (CEI) for Mexico increased by 0.2 percent in January 2023 to 110.6 (2016=100), after increasing by 0.3 percent in December 2022. The CEI grew by 1.1 percent in the six-month period from July 2022 to January 2023, half of the 2.2 percent growth rate over the previous six-month period.

“The LEI for Mexico increased slightly in January, partially reversing a drop in December,” said Casey Cloutier, Economic Research Analyst at The Conference Board. “The increase was driven only by stock prices and appreciation of the peso against the US dollar, with all other components contributing negatively. While the increase in the LEI was concentrated in only two components in January, the recent trajectory of the LEI has improved and no longer signals recession. However, a potential recession in the US and slower global growth may weigh on growth prospects for Mexico. The Conference Board projects a year-over-year GDP growth rate of 1.6 percent in 2023, down from 3.1 percent in 2022.”

The Mexico LEI and CEI both increased slightly in January

The increase was led by increasing stock prices and an appreciating exchange rate

The Mexico LEI no longer signaled recession in the near future

Note: The chart illustrates the so-called 3D’s rule which is a reliable rule of thumb to interpret the duration, depth, and diffusion – the 3D’s – of a downward movement in the LEI. Duration refers to how long-lasting a decline in the index is, and depth denotes how large the decline is. Duration and depth are measured by the rate of change of the index over the last six months. Diffusion is a measure of how widespread the decline is (i.e., the diffusion index of the LEI ranges from 0 to 100 and numbers below 50 indicate most of the components are weakening). The 3D’s rule provides signals of impending recessions 1) when the diffusion index falls below the threshold of 50 (denoted by the black dotted line in the chart), and simultaneously 2) when the decline in the index over the most recent six months falls below the threshold of -3.0 percent. The red dotted line is drawn at the threshold value (measured by the median, -3.0 percent) on the months when both criteria are met simultaneously. Thus, the red dots signal a recession.

About The Conference Board Leading Economic Index^® (LEI) for Mexico: The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by 5 months. Shaded areas denote recession periods or economic contractions. The dates above the shaded areas show the chronology of peaks and troughs in the business cycle.

The six components of The Conference Board Leading Economic Index^® for Mexico include: Industrial Production (Construction), Stock Prices, U.S. Refiners’ Acquisition Cost of Domestic and Imported Crude Oil, Manufacturing Inventories (Opinion Balance), Federal Funds Rate, and Real Exchange Rate.

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