MexECON Blog

May Trade Deficit Widens Further

Mexico's May merchandise trade deficit worsened to a seasonally-adjusted $1.1 billion, after revised deficits of $933.0 million in April and $468.3 million in March.  According to the report, the value of Mexican exports fell to $31.190 billion in May, reaching their lowest level since January.  The decline was 0.1% from the previous month, after a 1.8% fall in April.  In contrast, imports in May rose to a record high of $32.292 billion, up 0.4% from the previous month.  On an unadjusted basis, May exports were down 0.9% from the same month one year earlier, while imports were up 1.5%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and they were up 2.0% year-over-year in May.  The major manufactured exports showing the biggest increases were metal products, food and beverages, and autos and auto parts.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down 15.8% year-over-year in May.  Within this category, Mexican crude oil exports totaled 1.029 million barrels per day, down 14.1% from May 2012.  The average export price for Mexican crude fell to $97.75 per barrel, down 4.4% from one year earlier.  Finally, Mexican agriculture exports in May were down 4.9% year-over-year.  Among the agricultural products showing the worst performances, cattle exports were down 62.6%, citrus exports were down 53.8%, and strawberry exports were down 39.8%.  Among the agricultural products showing the best performances, tomato exports were up 6.7%, avocado exports were up 24.8%, and cucumber exports were up 38.6%.

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

Comment:  Measured in dollars, Mexican exports have basically flattened out over the last several quarters.  Because of a strengthening in the country's currency, at least until recently, exports as measured in pesos have actually been falling.  The result has been a significant headwind for the Mexican economy.  Fortunately, the trade picture is better now than it was at the beginning of the year.  Concerns about the U.S. "fiscal cliff" led to a steep drop in trade during January, but the decline was quickly reversed after U.S. policymakers came up with a viable workaround that reduced and delayed government spending cuts.  The spending cuts are now starting to take place, but it appears the U.S. economy is handling them well and is continuing to grow modestly.  Going forward, the rebound in the U.S. housing and auto markets is likely to prompt further growth in a range of Mexican exports, from building materials and home appliances to autos and auto parts.  That should improve the chances for a rebound in Mexican industrial production, hiring, and consumer spending later in the year.  Nevertheless, the on-going weakness in Mexican petroleum exports and the continued rise in imports could keep the trade balance in deficit for some time to come.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1305

Exports 1305

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