MexECON Blog

October Exports Rise 13.4 Percent YOY

In an initial estimate, Mexico's October merchandise trade deficit narrowed to $450.8 million, and the September deficit was revised downward to $1.053 billion.  According to the report, from the official statistics agency INEGI, Mexican exports rose 0.3% in October, after a revised 0.2% gain in September.  Imports dropped 1.7%, after a 3.5% increase in the previous month.  On an unadjusted basis, Mexican exports in October were up 13.4% from the same month one year earlier, while imports were up 11.9%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in October, they were up 9.7% year-over-year.  The major manufacturing categories showing the strongest export growth in October were steel and metal products, chemicals, plastics, and industrial equipment.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were up 32.0% year-over-year in October.  On a volume basis, Mexican crude oil exports totaled 1.375 million barrels per day, down 0.1% from October 2010.  On a value basis, however, the average export price for Mexican crude was $101.27 per barrel, up 35.6% from one year earlier.  Finally, Mexican agriculture exports in October were up 49.1% year-over-year.  Coffee exports were up an astounding 473.8% from one year ago, reflecting the continuing strong coffee market.  Among the other agricultural products showing good gains, avocado exports were up 115.9% year-over-year, while tomato exports were up 72.7%.

Comment:  Mexico's trade performance in October was somewhat positive.  The sharp narrowing in the deficit in was impressive, but the narrowing came mostly from a big pullback in imports.  Capital goods imports fell especially sharply, suggesting Mexican businesses may have started to retrench in the face of global financial turbulence and signs of slowing growth in the key developed economies.  The big positive in the report is that Mexican exports were able to rise modestly in this worrisome environment.  In fact, Mexico's export performance in October was a virtual mirror image of its performance in September.  This resilience comes on top of other recent reports showing Mexico's domestic demand still has significant momentum.  Finally, with presidential elections coming up in 2012, it is likely that fiscal policy will be loosened soon, and there has been speculation that Banco de México will cut interest rates.  These developments all suggest Mexican economic growth may hold up better than expected as growth abroad slows.  Risks remain weighted to the downside, but perhaps only slightly.

Patrick Fearon, CFA
Vice President, Fund Management

  Mexico's Merchandise Trade Balance
      Seasonally Adjusted, Million US$
                     Source:  INEGI
Trade Balance 1110

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