MexECON Blog

November Exports Rise 1.3 Percent YOY

Mexico's November merchandise trade deficit narrowed to a seasonally-adjusted $361.9 million, after a revised deficit of $803.9 million in October.  Prior to that, Mexico had posted modest trade surpluses for three straight months.  According to the report, released December 27 by the official statistics agency INEGI, the value of Mexico's exports jumped 2.3% in November, erasing small declines in October and September and marking the best increase since February.  Imports rose just 0.9%, after a 3.4% jump in the previous month.  On an unadjusted basis, Mexican exports in November were up 1.3% from the same month one year earlier, while imports were up 4.7%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in November, they were up 4.6% year-over-year.  The major manufactured goods showing the strongest export gains in November were rubber and plastic goods, steel products, and autos and auto parts.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 15.3% year-over-year in November.  Within this category, Mexican crude oil exports totaled 1.374 million barrels per day, up 0.9% from November 2011.  However, the average export price for Mexican crude was $94.58 per barrel, down 12.0% from one year earlier.  Finally, Mexican agriculture exports were down 6.1% year-over-year.  Among the agricultural products posting the weakest performances, Mexican shrimp exports were down 46.6%, and tomato exports were down 28.1%.  In contrast, cucumber exports were up 65.3%, and bell pepper exports were up 24.0%.

Comment:  While the narrower trade gap in November is encouraging, there are reasons for caution regarding the Mexican economy.  Importantly, exports weakened significantly during the summer and fall.  Imports weakened even more, allowing the trade balance to swing to a surplus, but the fall in imports came in large part because Mexican manufacturing relies heavily on raw materials, subassemblies, and capital goods from abroad.  The key thing is that weaker demand overseas tends to muffle Mexico's overall industrial production, investment, and hiring.  Recent data shows the export slowdown during the summer and fall has already weighed on industrial activity and employment in recent months, and it could soon start to have a more noticeable impact on investment.  Even worse, the rebound in exports during November could prove temporary if tighter fiscal policy reduces U.S. demand in 2013, as now seems likely.  Mexico is much more internationally competitive than it was just a few years ago, but the problems in the key U.S. market and threats from Europe are still big risks.

Patrick Fearon, CFA
Vice President, Fund Management

                                      Mexico's Merchandise Trade Balance
                                           Seasonally Adjusted, Million US$
                                                       Source:  INEGI
Trade Balance 1211

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