MexECON Blog

August Exports Rise 37.6 Percent YOY

In an initial estimate from INEGI, the official statistics agency, Mexico's August merchandise trade deficit narrowed to a seasonally-adjusted $280.8 million.  That compares with revised deficits of $369.3 million in July and $826.5 million in June.  According to the report, Mexican exports rose 2.1% in August, after a rise of 4.2% in July.  Imports in August rose 1.8%, after a July increase of 2.2%.  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:  Today's trade report is quite solid.  The report shows that year-over-year export growth has accelerated again.  In addition, the second straight narrowing in the trade deficit suggests the slower trade activity in mid-year may have been temporary.  The narrowing trade deficit also suggests Mexican economic growth could continue to be strong in the third quarter, and it should give a lift to the peso, which has recently been rebounding.  Nevertheless, the country's export rebound continues to be uncomfortably dependent on rising exports of trucks, autos, and auto parts to the United States.  As has been argued often in this blog, the risk is that U.S. inventory rebuilding could continue to slow, even as U.S. corporate and consumer demand could fail to accelerate significantly.  In that case, Mexican exports could stall before other sectors of the economy are growing fast enough to take up the slack.  Yesterday's revised estimate of Mexico's second-quarter gross domestic product (GDP) did show surprisingly good growth in domestic consumer spending, but the country's economic rebound will not be on a truly firm foundation until corporate investment is rising more strongly as well.

Patrick Fearon, CFA
Vice President, Fund Management

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

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