The Conference Board

FOR RELEASE: 11:00 A.M. ET, MONDAY, MARCH 18, 2002

MEXICO COMPOSITE INDEXES FOR JANUARY 2002

The Press Release in a PDF file
English Version Spanish Version

The Conference Board announced today that the leading index for Mexico increased 0.3 percent and the coincident index remained flat in January.

LEADING INDICATORS. Four of the six components that make up the leading index increased in January. The positive contributors to the index - from the largest positive contributor to the smallest - are stock prices, net insufficient inventories, U.S. refiners' acquisition cost of domestic and imported crude oil, and the inverted real exchange rate. The only negative contributor was the construction component of industrial production*, while the inverted federal funds rate remained unchanged.

The leading index now stands at 104.8 (1990=100). Based on revised data, the leading index increased 0.6 percent in December and declined 0.1 percent in November. During the six-month span through January, the index declined 0.9 percent, and three of the six components increased (diffusion index, six-month span equals 50.0 percent).

COINCIDENT INDICATORS. Two of the four components that make up the coincident index decreased in January. The negative contributors - from the larger negative contributor to the smaller - are the inverted unemployment rate* and industrial production*. The number of employed (measured by IMSS beneficiaries) increased, while retail sales* remained unchanged.

The coincident index remained unchanged in January and now stands at 112.6 (1990=100). Based on revised data, the coincident index decreased 0.1 percent in December and declined 0.1 percent in November. During the six-month span through January, the index decreased 0.4 percent, with two of four components declining (diffusion index, six-month span equals 50.0 percent).

The next release is scheduled for April 22, 2002 at 11:00 A.M. (ET)
In Mexico - April 22, 2002 at 10:00 A.M. (MEX)

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in the tables in this release are those available "as of" 7 P.M. (MEX) March 14, 2002. Some series are estimated as noted below.

NOTES: Series in the leading index based on The Conference Board estimates include industrial production - construction component and CPI (U.S.) used as a deflator for the real exchange rate component. Series in the coincident index based on The Conference Board estimates include retail sales and industrial production, and the unemployment rate.

Professional Contacts at The Conference Board:
Ataman Ozyildirim: 1-212-339-0399
Mike Fort: 1-212-339-0402

THE CYCLICAL INDICATOR APPROACH. The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading and coincident indexes are essentially composite averages of between four and nine individual leading or coincident indicators. (See page 3 for details.) They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component-primarily because they smooth out some of the volatility of individual components.

Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, while the cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity.

A change in direction in a composite index does not signal a cyclical turning point unless the movement is of significant size, duration, and scope. Historical analysis with U.S. data shows recession warnings are best determined by looking for negative growth of about 3.5 percent, coupled with declines in at least half of the components over a six-month span. Further explanations of the cyclical indicator approach and the composite index methodology appear in The Conference Board's Business Cycle Indicators report and Web site:www.globalindicators.org.

Mexico Composite Indexes: Components and Standardization Factors

	Leading Index	Factor
1.	Industrial Production, Construction Component	.0262
2.	Stock Prices	.0168
3.	U.S. Refiners' Acquisition Cost of Domestic and Imported Crude Oil	.0272
4.	Net Insufficient Inventories	.1255
5.	Federal Funds Rate	.0289
6.	Real Exchange Rate	.7754

Coincident Index

1.	Industrial Production	.1086
2.	Retail Sales	.0504
3.	Employment	.1663
4.	Unemployment Rate	.6747

Notes:
The component factors are inversely related to the standard deviation of the month-to-month changes in each component. They are used to equalize the volatility of the contribution from each component and are "normalized" to sum to 1. (Under normal circumstances, updates to the leading and coincident indexes only incorporate revisions to data over the past six months.)

The factors above were calculated using 1985-1999 as the sample period for measuring volatility for the leading index, and 1986-1999 as the sample period for the coincident index. There are additional sample periods as the result of different starting dates for the component data. When one or more components is missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1. For additional information on the standardization factors and the index methodology visit our Web site: www.globalindicators.org.

To address the problem of lags in available data, those leading and coincident indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each component. The resulting indexes are constructed using real and estimated data, and will be revised as the data unavailable at the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program. The main advantage of this procedure is to utilize in the leading index the data, such as stock prices, that are available sooner than other data on "real" aspects of the economy, such as new orders and changes in inventory. Empirical research by The Conference Board suggests there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. The Conference Board has become a global leader in helping executives build strong professional relationships, expand their business knowledge and find solutions to a wide range of business challenges. The Board's Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, economic analysis and objective indicators such as the Leading Economic Indicators and the Consumer Confidence Index.

This role is part of a long tradition of research and education that stretches back to the compilation of the first continuous measure of the cost of living in the United States in 1919. In 1995, The Conference Board assumed responsibility for computing the composite indexes from the U.S. Department of Commerce. The Conference Board now produces business cycle indexes for the U.S., Australia, France, Germany, Korea, Japan, Mexico and the U.K. To subscribe to any of these indexes, please visit www.globalindicators.org, contact the Global Indicators Research Institute at 212-339-0312, or email indicators@conference-board.org.

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