Between January and July, the leading index grew by 5.2 percent (about a 10.7 percent annual rate), well above the 0.4 percent rate of growth (about 0.9 percent annualized) that prevailed between July 2007 and January 2008. In addition, the strengths and weaknesses among the leading indicators have been balanced in recent months.
The coincident index declined in July after a strong increase in June. Industrial production made a very large negative contribution to the index, while employment, as measured by total IMSS beneficiaries, increased slightly. Since January, the coincident index has grown by 0.4 percent (about a 0.7 percent annual rate), well below the 2.2 percent rate of growth (about a 4.5 percent annual rate) that prevailed during the previous six-month period. However, the strengths among the coincident indicators have remained more widespread than weaknesses in recent months.
After declining late in 2007 through January of this year, the leading index resumed growing in February, but this growth was not very widespread among its components. At the same time, the coincident index, a measure of current economic activity, has been fluctuating around an essentially flat trend after growing strongly throughout most of 2007. Meanwhile, real GDP grew at about a 0.1 percent average annual rate in the first half of 2008 (including a 0.6 percent annual rate in the second quarter and a -0.5 percent annual rate in the first quarter of 2008), down from a 4.2 percent average annual rate in the second half of 2007. Taken together, the recent behavior of the composite indexes suggests that the economy should continue expanding in the near term, albeit at a slow to moderate pace.
LEADING INDICATORS
Four of the six components that make up the leading index increased in July. The positive contributors to the index - from the largest positive contributor to the smallest one - are the US refiners' acquisition cost of domestic and imported crude oil, net insufficient inventories, the (inverted) real exchange rate, and the industrial production construction component. Stock prices and the (inverted) federal funds rate declined in July.
With the 0.1 percent increase in July, the leading index now stands at 173.6 (1990=100). Based on revised data, this index increased 0.2 percent in June and declined 0.8 percent in May. During the six-month span through July, the index increased 5.2 percent, with three of the six components increasing (diffusion index, six-month span equals 50.0 percent).
COINCIDENT INDICATORS
Two of the three components that make up the coincident index increased in July. The positive contributors - from the largest positive contributor to the smallest one - are retail sales, and number of people employed (measured by IMSS beneficiaries). Industrial production declined.
With the decrease of 0.5 percent in July, the coincident index now stands at 169.5 (1990=100). Based on revised data, this index increased 0.9 percent in June and decreased 0.9 percent in May. During the six-month span through July, the index increased 0.4 percent, with three of the four components increasing (diffusion index, six-month span equals 66.7 percent).
