MexECON Blog

August Export Rise Confirmed

Mexico's August merchandise trade deficit narrowed to a seasonally-adjusted $280.9 million, according to a revised estimate from the official statistics agency INEGI.  That was little changed from the original estimate of $280.8 million, but it was much lower than the revised July deficit of $369.3 million and the revised June deficit of $826.5 million.  According to the report, Mexican exports rose 2.1% in August, after a rise of 4.2% in July.  Imports rose just 1.8%, after an increase of 2.2% in the previous month.  On an unadjusted basis, Mexican exports in August were up 37.6% from the same month one year earlier, while imports were up 36.5%.

Manufactured goods make up the vast majority of Mexican exports, and they were up 39.8% year-over-year in August.  Almost one-third of the year-over-year increase in manufacturing exports came from autos and auto parts, which were up 55.9% from August 2009.  Other manufacturing categories posting large increases were industrial equipment, steel and metal products, and foods.  Petroleum products are the second-most important category of Mexican exports, and they were up 28.0% year-over-year in August.  On a volume basis, Mexican petroleum exports came in at 1.351 million barrels per day, up 22.7% from August 2009.  On a value basis, the average export price for Mexican oil rose to $69.64 per barrel, up 3.6% from one year earlier.  Finally, Mexican agriculture exports in August were up 12.8% year-over-year, with the increase driven primarily by stronger exports of cattle, tomatoes, fruits, and fish and shellfish.

Comment:  Mexico's solid trade performance in August points to continued strong economic growth in the third quarter.  Particularly important, the August report shows year-over-year export growth is accelerating again, while the trade deficit has fallen to its lowest level since a small surplus in April.  Because trade is driving Mexico's current economic recovery, today's report is likely to be positive for Mexican asset prices.  The report is also likely to be positive for the peso, especially since the currency often strengthens when the Mexican trade deficit is narrowing versus the U.S. trade deficit and Mexican stock prices are rising.  Nevertheless, Mexico's current export boom, and hence its economic rebound, are heavily dependent on rising auto exports to the United States.  This is a narrow foundation on which to build a lasting economic recovery.  The Mexican boom will not be on a truly firm foundation until the country's consumer spending accelerates further and domestic investment starts rising again.

Patrick Fearon, CFA
Vice President, Fund Management

                          Mexican Exports
            Seasonally Adjusted, Million US$
                            Source:  INEGI
Revised Trade Balance 1008

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