MexECON Blog

June Exports Fall 0.5 Percent YOY

Mexico's June merchandise trade balance showed a seasonally-adjusted deficit of $169.5 million, after revised deficits of $244.9 million in May and $325.3 million in April.  That marked the first time since last autumn that Mexico's trade balance has been in deficit for three straight months.  According to the report, from the official statistics agency INEGI, the value of Mexico's exports fell 2.6% in June, after a decrease of 1.7% in May.  Imports fell 2.9%, after declining 1.9% in the previous month.  On an unadjusted basis, Mexican exports in June were down 0.5% from the same month one year earlier, while imports were down 2.1%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in June, they were up 4.4% year-over-year.  The major manufactured goods showing the strongest export gains in June were autos and auto parts, plastics, and chemicals.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 27.8% year-over-year in June.  Within this category, Mexican crude oil exports totaled 1.201 million barrels per day, down 15.7% from June 2011.  The average export price for Mexican crude was $90.07 per barrel, down 12.5% from one year earlier.  Finally, Mexican agriculture exports in June were up 11.0% year-over-year.  Among the agricultural products posting the strongest performances, cattle exports were up 60.5%, mango exports were up 60.8%, and cucumber exports were up 64.9%.

Comment:  Even though Mexico's trade deficit appears to be narrowing again, today's report was decidedly negative in several respects.  On a month-over-month basis, Mexican exports have now weakened for four straight months.  In addition, imports have been falling more rapidly, which suggests a big pullback in domestic demand.  These trends help explain why the country's exports and imports are now showing their first year-over-year declines since the depths of the global financial crisis in 2009.  The new weakness in Mexican trade undoubtedly reflects falling confidence around the world as the European debt crisis worsens again and U.S. employment growth slows to a crawl.  Not only have those problems reduced foreign and domestic demand, but they have also pushed down the value of Mexico's petroleum and other mineral exports.  As I noted in my report on the May trade balance last month, the problems abroad show no sign of easing, so Mexico's international trade could continue to soften in the coming months.  Mexico's trade performance was unusually healthy for the last two years, but it may now be entering a significantly weaker phase. 

Patrick Fearon, CFA
Vice President, Fund Management

                      Mexico's Merchandise Trade Balance
                          Seasonally Adjusted, Million US$
                                      Source:  INEGI
Trade Balance 1206

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