MexECON Blog

Trade Deficit Narrows Further in July

Mexico's July merchandise trade deficit narrowed to a seasonally-adjusted $365.7 million, compared with a revised deficit of $417.4 million in June.  The value of Mexican exports rose 0.9% to $31.721 billion in July, marking the second straight monthly increase.  Imports rose 0.8% to $32.067 billion, after a sharp decline in the previous month.  On an unadjusted basis, exports in July were up 6.3% from the same month one year earlier, while imports were up 9.6%.

Manufactured goods make up the vast majority of Mexico's merchandise exports.  In July, they were up 5.6% year-over-year.  The major manufactured exports showing the biggest increases were food and beverages, consumer metal products, and chemicals.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were up 13.3% year-over-year in July.  Within this category, Mexican crude oil exports totaled 1.210 million barrels per day, up 7.7% from July 2012.  The average export price for Mexican crude rose to $100.67 per barrel, up 5.6% from one year earlier.  Finally, Mexican agriculture exports in July were down 6.3% year-over-year.  Among the agricultural products showing the worst performances, cattle exports were down 57.1%, chickpea exports were down 49.3%, and coffee exports were down 44.2%.  Among the agricultural exports showing the best performances, avocado exports were up 35.3%, mango exports were up 48.3%, and plantain exports were up 87.9%.

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

Comment:  Mexican exports have virtually stalled over the last year and a half, putting a big damper on industrial activity and hiring.  It is therefore encouraging that sales abroad increased for a second straight month during July.  Based on other recent reports, it appears the improvement has already produced a marginal acceleration in manufacturing.  Nevertheless, it is not at all clear that U.S. demand can strengthen enough for trade to really boost the Mexican economy.  Mexico is also facing domestic headwinds, such as tight government spending, shifting policies that have reduced construction activity, and a stagnant labor market that has made consumers more cautious about spending.  The most likely scenario going forward is that the Mexican economy will continue to grow at a below-average pace for a while yet.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1307

Exports 1307 B

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