MexECON Blog

May Exports Rise 25.4 Percent YOY

In an initial estimate, Mexico's May merchandise trade deficit widened to a seasonally-adjusted $263.8 million, after a revised deficit of $130.0 million in April.  That marked the country's first back-to-back trade deficits since last autumn.  According to the report, from the official statistics agency INEGI, Mexican exports rose 2.9% in May, easily erasing their 1.0% decline in April.  However, imports jumped 3.3%, accelerating from a rise of 2.3% in the previous month.  On an unadjusted basis, Mexican exports in May were up 25.4% from the same month one year earlier, while imports were up 24.0%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in May, they were up 23.6% year-over-year.  The major manufacturing categories showing the strongest export growth were steel and metals, food and beverages, and industrial machinery and equipment.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they jumped 32.2% year-over-year in May.  On a volume basis, Mexican crude oil exports totaled 1.368 million barrels per day, down 14.0% from May 2010.  On a value basis, however, the average export price of Mexican crude rose to $104.33 per barrel, up 53.9% year-over-year.  Finally, Mexican agriculture exports in May were up 25.6% from one year earlier.  Mexican coffee exports were up a whopping 163.3% year-over-year, leading the major categories of farm exports.  Among the other major farm categories posting large gains, cucumber exports were up a strong 49.8% year-over-year, while grape exports were up 48.1%.

Comment:  While May export growth reaccelerated on a year-over-year basis, that partly reflected an export decline in May 2010.  The more telling data in today's report is that the month-over-month rise in exports was not particularly strong compared with the monthly gains of 4.0% to 6.0% that were common early in the economic rebound.  In addition, Mexican exports have now fallen on a seasonally-adjusted basis in two of the last four months, which helps explain the return to overall trade deficits.  This softening is consistent with recent evidence that the world economic recovery has hit a potentially long lasting soft patch.  Unfortunately, domestic consumption and investment in Mexico may not yet be strong enough to make up for softer exports.  The most likely scenario going forward is that Mexican economic growth will merely moderate - as shown in this week's second regular estimate of first-quarter gross domestic product - but there is an increasing risk that growth could slow more dramatically.

Patrick Fearon, CFA
Vice President, Fund Management

                       Mexico's Merchandise Trade Balance
                             Seasonally Adjusted, Million US$
                                            Source:  INEGI
Trade Balance 1105

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