MexECON Blog

Trade Balance Snaps Back to Deficit

Mexico's January trade balance reversed sharply to a seasonally-adjusted deficit of $2.221 billion, after a revised surplus of $1.411 billion in December.  The big deficit at the beginning of 2014 erased more than half of the combined surpluses over the previous seven months.   In January, the value of Mexico's exports fell to $30.735 billion, down 3.2% from December.  More important, the value of Mexico's imports jumped to $32.956 billion, up 8.6%.  The surge in imports came mostly from increased purchases of foreign intermediate goods (semi-finished products, components, and other inputs to the manufacturing process, many of which are ultimately re-exported as finished products).  On an unadjusted basis, Mexican exports in January were down 1.0% from the same month one year earlier, while imports were up 0.3%.

Manufactured goods make up the vast majority of Mexico's merchandise exports, and in January, they were up 1.5% year-over-year.  The major manufactured goods showing the biggest increases were industrial equipment, professional and scientific equipment, and food and beverages.  Crude oil and other petroleum products are the second-most important category of Mexican exports, and they were down a whopping 15.8% year-over-year in January.  Within this category, Mexican crude oil exports averaged 1.172 million barrels per day, down 9.1% from January 2013.  The average export price for Mexican crude fell to $90.72 per barrel, down 9.8% from one year earlier.  On a brighter note, Mexican agriculture exports in January were up 6.5% year-over-year.  Among the agricultural products posting the best performances, cucumber exports were up 52.1%, fish and shellfish exports were up 35.8%, and avocado exports were up 26.2%.

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

Comment:  Mexican trade data can be volatile around the turn of the year, so the disappointing figures for January may not paint a perfectly accurate picture.  For example, the big jump in imports at the beginning of 2014 may simply be a one-time snapback after purchases from abroad fell in five of the previous seven months.  Continued weakness in foreign and domestic demand could again weigh on imports in the coming months.  That seems especially likely given the continuing slide in Mexican exports.  Mexican exports rose to an all-time high last August, but they then flattened out, and they have been falling at an accelerating pace over the last few months.  They are now down 4.9% from last summer's record.  Agricultural exports are up slightly since August, but every other major category has posted a decline, with exports from the key auto and auto parts sector dropping 9.0%.  Some of the problem with Mexico's exports may simply reflect the maturing of the U.S. economic recovery and the soft spot it entered last year.  Exports may rebound if the U.S. economy gets a second wind in 2014.  Based on the latest data, however, it is not at all clear whether the U.S. acceleration will be as strong as previously expected.  Mexico's trade sector may remain relatively soft, even as key domestic sectors remain in the doldrums.

Patrick Fearon, CFA
Vice President, Fund Management

Trade Balance 1401

Exports 1401

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