MexECON Blog

Trade Surplus Still Rising on Import Declines

Mexico's December trade surplus widened to a seasonally-adjusted $1.524 billion, after revised surpluses of $909.0 million in November and $636.9 million in October.  The surplus in December was the second straight all-time record, and it marked the fifth straight month in which Mexican exports exceeded imports.  The value of Mexico's exports in December rose to $31.931 billion.  That was up 0.1% from November, though it was still below the record high set in the month before that.  In contrast, the value of Mexico's imports dropped to $30.407 billion in December, for a big decline of 1.9%.  Mexican imports have now fallen by 1.7% or more in four of the last five months.  On an unadjusted basis, Mexican exports in December were up 6.4% from the same month one year earlier, while imports were up just 4.2%.   

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in December, they were up 4.3% year-over-year.  The major manufactured goods showing the biggest increases were steel products, professional and scientific equipment, and food and beverages.  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 up 13.3% year-over-year in December.  Within this category, Mexican crude oil exports averaged 1.308 million barrels per day, up 11.4% from December 2012.  The average export price for Mexican crude fell to $92.09 per barrel, down 3.8% from one year earlier.  Finally, Mexican agriculture exports in December were up 20.1% year-over-year.  Among the agricultural products posting the best performances, frozen shrimp exports surged 157.6%, while cucumber exports jumped 91.5%.

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

Comment:  Mexican exports solidified a bit last autumn, but they have basically flattened out since then.  The recent improvement in the trade balance has therefore come almost entirely from falling imports.  The declines have come mostly from weakness in foreign purchases of consumer goods and intermediate inputs, but imports of capital equipment have receded as well.  The fall in consumer goods imports is consistent with the recent pullback in Mexican retail sales, as hiring stalled and consumer optimism faded.  The fall in intermediate goods and capital equipment imports is perhaps more worrisome, as it suggests manufacturers are so pessimistic about future sales that they are reducing their purchases of raw materials, production supplies, and new productive machinery.  Because purchases abroad are subtracted from the calculation of gross domestic product, the recent import declines will help raise Mexico's reported economic growth rate for the fourth quarter.  However, the economy will probably start slowing again in future quarters if exports do not strengthen, if manufacturers do not start hiring and investing more aggressively, and if domestic sectors such as construction and retail do not start to recover.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1312Exports 1312

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