MexECON Blog

Falling Imports Boost Trade Surplus

Mexico's November trade surplus widened to a seasonally-adjusted $970.5 million, after revised surpluses of $599.2 million in October and $710.2 million in September.  The surplus in November was Mexico's largest ever, and it marked the first time the trade balance was in surplus for four straight months since late 2011 and early 2012.  The value of Mexico's exports edged down to $32.067 billion in November, for a decline of 0.6% from the previous month.  However, the value of the country's imports dropped to $31.097 billion, a fall of 1.7%.  On an unadjusted basis, Mexican exports in November were up 0.8% from the same month one year earlier, while imports were down 4.1%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in November, they were up 3.2% year-over-year.  The major manufactured exports showing the biggest increases were food and beverages, metal goods, and professional and scientific equipment.  Exports of autos and auto parts alone were up 7.7% year-over-year.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 15.0% year-over-year in November.  Within this category, Mexican crude oil exports averaged 1.200 million barrels per day, down 12.7% from November 2012.  The average export price for Mexican crude fell to $89.64 per barrel, down 5.3% from one year earlier.  Finally, Mexican agriculture exports in November were up a whopping 15.2% year-over-year.  Among the agricultural products posting the best performances, frozen shrimp exports jumped 57.7%, avocado exports rose 34.6%, and citrus exports were up 26.8%.

The report was released today by INEGI, the official statistics agency.

Comment:  The surprisingly strong trade figures for November suggest Mexico is taking full advantage of the recent reacceleration in the U.S. economy.  Although Mexican exports fell back modestly in November, sales abroad strengthened significantly in mid-autumn and helped the economy return to growth in the third quarter after a decline in the second quarter.  Nevertheless, today's report also reflects a disconcerting, continuing weakness in Mexican imports.  Over the last six months, while exports were rising 2.8%, overall imports fell 3.5%.  Imports of consumer goods have dropped 6.4%, consistent with a big slump in retail activity that could eventually be reversed if increased exports lead to higher employment and increased confidence.  More worrisome, imports of capital goods have declined 3.8%, reflecting a decline in investment that could eventually prevent the economy from accelerating as much as it otherwise could.  Of course, falling imports help boost the trade balance, and because purchases from abroad are subtracted from the calculation of gross domestic product, import declines also help raise the economic growth rate.  However, the temporary positives from declining consumption and investment imports will eventually give way, and weak consumer spending and investment will probably show their true character as headwinds for the Mexican economy.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1311

Exports 1311

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