MexECON Blog

January Exports Fall 0.2 Percent YOY

Mexico's January merchandise trade balance swung to a seasonally-adjusted deficit of $2.192 billion, after a revised surplus of $549.0 million in December.  It was Mexico's worst trade deficit since the depths of the global financial crisis in late 2008.  According to the report, released today by the official statistics agency INEGI, the value of Mexican exports fell to $29.653 billion in January, down 4.9% from December.  Imports jumped to $31.846 billion, for a gain of 4.0%.  On an unadjusted basis, Mexican exports in January were down 0.2% from the same month one year earlier, while imports were up 9.3%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in January, they were up just 1.0% year-over-year.  The major manufactured products showing the strongest export gains were steel, rubber and plastics, and autos and auto parts.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 1.5% year-over-year in January.  Within this category, Mexican crude oil exports totaled 1.289 million barrels per day, up 8.2% from January 2012.  The average export price for Mexican crude was $100.82 per barrel, down 7.1% from one year earlier.  Finally, Mexican agriculture exports were down 8.7% year-over-year in January.  Among the agricultural goods posting the best performances, citrus exports were up 17.6% and tomato exports were up 9.8%.  Among the agricultural products with the worst performances, however, cattle exports were down 48.8% and onion and garlic exports were down 45.5%.

Comment:  Mexican factory exports jumped in the final months of 2012, helping boost the purchasing managers' index for the manufacturing sector to a record high and underpinning a rise in overall exports during the middle of the quarter.  The rise in exports and manufacturing, coupled with a continued upward trend in retail sales, provided an assuring counterpoint to the gathering weakness in construction, mining, employment, and wholesale activity.  However, the extraordinary export decline in January and the previously reported drop in retail sales during December are very concerning.  While weaker construction and slower wholesale shipments may have reflected corporate concerns about a potential slowdown in the future, it now appears that a sharp drop in final demand has actually materialized both abroad and at home.  It may be that some of these problems reflect worries about the U.S. "fiscal cliff" in late 2012 and concerns that the recent tax hikes north of the border will crimp demand for Mexican exports.  If so, the problems could reverse as the U.S. economy keeps growing and U.S. consumers adjust to the new tax rates.  That would be consistent with the Mexican economy settling down into a phase of moderate activity after several years of above-average growth.  Nevertheless, the breadth and suddenness of the present weakness suggest that it may also reflect a more serious, long-lasting correction for the Mexican economy.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1301

Exports 1301

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