MORELIA, Mexico (AP) _ Despite the economic crisis, Mexico's governing party took an early lead today in six state elections, including a close gubernatorial race in Michoacan in the west.

But the conservative National Action Party made important electoral gains in the weekend balloting, strengthening its position as Mexico's No. 2 political force into the next century. Early returns showed it led in mayoral races in the capitals of Michoacan, Puebla, Sinaloa and Oaxaca states.

At noon, the governing Institutional Revolutionary Party candidate for mayor of Puebla City, German Sierra Sanchez, conceded defeat. He wished the best to the National Action winner, Gabriel Hinojosa Rivero, and said he would return to his federal Senate seat.

With 60.5 percent of the votes for Michoacan governor counted, official returns showed the ruling Institutional Revolutionary Party (PRI) ahead with 38.4 percent, the leftist Democratic Revolutionary Party (PRD) with 29.5 percent and the National Action Party with 28.8 percent.

Support for the governing party has declined since an economic crisis shook Mexico last December, after President Ernesto Zedillo took office Dec. 1 with pledges to allow full democratic reform.

``We are seeing a country that we never would have imagined a few years ago ... with the advance of the National Action Party in large cities all over the country. This is an enormous advance,'' analyst Sergio Sarmiento said on independent Television Azteca.

The National Action Party has harnessed popular discontent with the crisis to win an unprecedented three gubernatorial posts this year.

Millions of Mexicans voted Sunday in local elections across six states, testing a governing party frayed by the devaluation of the peso and loss of 1.1 million jobs. Inflation has soared from 7 percent in 1994 to an estimated 50 to 60 percent this year.

In the states of Puebla, Sinaloa, Tlaxcala, Oaxaca and Tamaulipas, 6.6 million people were registered to pick mayors and state legislators. In Mexico City, voters chose 365 neighborhood council members.

In Michoacan state, early returns showed Victor Manuel Tinoco Rubi of the ruling party leading by nine percentage points in the race for governor, with two other candidates jostling for second place.

Cristobal Arias Solis of the Democratic Revolution Party was second, but Felipe Calderon Hinojosa of the National Action Party was behind by less than one percentage point.

It was perhaps the most closely watched race, as 1.9 million Michoacan voters also chose 113 mayors and 30 state legislators.

Michoacan is the home state of Mexico's most revered president, Lazaro Cardenas, a populist who gave land to the poor during his 1934-40 term. His son, Cuauhtemoc, became governor but broke from the leading party in 1987 to establish the Democratic Revolutionary Party.

The ruling party said early trends seemed to favor its candidates in state legislative races in Michoacan, Tlaxcala, Puebla, Tamaulipas and Sinaloa.

But the race was close in Puebla, where one exit poll found National Action Party leading with 50.2 percent to the ruling party's 38.6 percent. The University of Guadalajara's Center for Opinion Research, the pollster, said the survey had a margin of error of 5 percentage points.

In power for 66 years, the ruling party lost its first governorship in 1989 when a National Action Party candidate won Baja California. The National Action party won again there this year and now has governors in four states.

Balloting was largely uneventful in five of the six states. In Oaxaca, a ruling party member was killed in one town and the brother of a Democratic Revolutionary Party candidate was shot dead in another.