MexECON Blog

September Exports Rise 20.8 Percent YOY

In an initial estimate, Mexico's September merchandise trade balance narrowed for a third straight month to a seasonally-adjusted $87.3 million.  The figure was much better than the revised deficits of $238.3 million in August, $314.8 million in July, and $828.1 million in June.  According to the report, from the official statistics agency INEGI, Mexican exports fell 0.8% in September, after two straight months of strong increases, but imports fell by 1.4%.  On an unadjusted basis, Mexican exports in September were up 20.8% from the same month one year earlier, while imports were up 18.5%.

Manufactured goods make up the vast majority of Mexican exports, and they were up 21.6% year-over-year in September.  The rise in manufacturing exports continues to come in large part from the auto sector.  In September, more than one-third of the year-over-year increase in manufacturing exports came from autos and auto parts, which were up 35.1% from September 2009.  Other manufacturing exports posting substantial increases were steel and metal products, food and beverages, and industrial equipment.  Petroleum products are the second-most important category of Mexican exports, and they were up 18.0% year-over-year in September.  On a volume basis, Mexican crude oil exports came in at 1.337 million barrels per day, up 18.2% from September 2009.  On a value basis, the average export price for Mexican crude oil rose to $69.91 per barrel, up 8.0% from one year earlier.  Finally, Mexican agriculture exports in September were down 7.7% year-over-year, with the decline primarily reflecting lower foreign sales of produce items, such as bell peppers, cucumbers, avocados, and melons. 

Comment:  Mexico's narrowing trade deficit shows the all-important export sector has weathered the lull of late spring and early summer and is now firing on all cylinders again.  Even though year-over-year export growth has slowed from the increases of 40% or more that were common earlier this year, some moderation was inevitable because the current figures are now being compared to higher base figures last year.  The renewed narrowing of the trade deficit should help boost third-quarter economic growth, and it should give some additional upward momentum to the peso.  Nevertheless, Mexico's current economic rebound continues to be narrowly focused on rising exports to the United States, and its reliance on higher sales of autos and auto parts is particularly worrying.  If U.S. growth continues to slow in response to waning fiscal stimulus, the completion of inventory rebuilding, and continued deleveraging by consumers, Mexican exports could soften or even stall.  The Mexican recovery will not be on a truly firm base until the country's consumer spending accelerates further and investment starts to rise again.

Patrick Fearon, CFA
Vice President, Fund Management

                                  Mexico's Trade Balance
                         Seasonally Adjusted, Million US$
                                           Source:  INEGI
Trade Balance 1009

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